UK Car Production Faces Significant Decline Amid Export Challenges

Data from the Society of Motor Manufacturers and Traders (SMMT) reveals a sharp decline in UK car production, with both domestic and export markets facing significant downturns. Production for the UK market fell by 20.8% in September compared to the previous year, while exports dropped by 20.6%. This decline follows a particularly strong September 2022, which marked the best month for UK car production since 2020, making the current year-on-year comparison even more pronounced.

Despite the September downturn, overall production for the UK market has seen a year-to-date increase of 6.5%. However, this growth is overshadowed by a steep 14.4% decrease in exports, leading to an overall production decline of 10.2% for 2024, with 592,862 units produced thus far.

Challenges in Overseas Markets

The export slump is particularly evident in several key overseas markets. Shipments to China, a major destination for UK car exports, fell by 23.1% in September as the country grapples with an economic slowdown. While China’s GDP grew by 4.6% in the third quarter of 2024, it fell short of the government’s target of 5%, impacting demand for imported goods, including vehicles. In response, Beijing has implemented measures aimed at stimulating growth in the world’s second-largest economy.

Similarly, exports to the EU, which is the UK’s largest market for cars, experienced a significant decline, dropping by 28.6% in September to 26,825 units. This decrease coincides with weaker car sales across the European bloc, with the European Automobile Manufacturers’ Association reporting an 18.3% drop in EU car sales in August, the lowest in three years. Major markets such as Germany, France, and Italy all experienced double-digit declines.

On a more positive note, exports to the US rose by 24.6% in September, totaling 8,210 units and accounting for 16% of total UK car shipments.

Transitioning to Electric Vehicles

The decline in production has largely been attributed to car manufacturers retooling their factories to focus on electric and hybrid vehicle production. This shift aligns with the UK’s goal of phasing out internal combustion engine vehicles by 2030. Notably, nearly a third of all cars produced in the UK in September were battery electric, plug-in hybrid, or hybrid models, underscoring the industry’s transition toward greener technologies.

Mike Hawes, chief executive of the SMMT, characterized the production declines as “short-term” and anticipated. He emphasized the need for “the necessary industrial and market conditions” to stimulate growth. Hawes urged the government to leverage the upcoming Autumn Budget and industrial strategy to enhance business confidence, attract investment, and secure the competitiveness of the UK automotive sector.

Despite the production challenges, the automotive industry remains the UK’s largest exporter of manufactured goods. The sector accounted for 13.9% of total exports in the first half of 2024, highlighting its critical role in the UK economy. As manufacturers pivot towards zero-emission vehicles, they will depend heavily on supportive government policies and investment to maintain their global competitiveness and meet the growing demand for electric cars.