U.K. car manufacturing declines as automakers retool for electric vehicle production

The UK automotive sector is experiencing a significant downturn in production as manufacturers retool their facilities to meet the growing demand for electric vehicles (EVs). This transition, while necessary for the industry's future, has led to a sharp decline in overall car manufacturing output across the country.

According to the latest figures released by the Society of Motor Manufacturers and Traders (SMMT), UK car production dropped by 7.6% in the first half of 2024 compared to the same period last year. This decline represents a loss of 34,094 units, with total production reaching 416,074 vehicles.

The shift towards EV production has been particularly impactful, with June seeing a staggering 26.6% decrease in output due to multiple model changes requiring extensive retooling of manufacturing lines. This significant drop highlights the challenges faced by the industry as it adapts to new technologies and market demands.

Mike Hawes, chief executive of the SMMT, commented on the situation: "The UK auto industry is moving at pace to build the next generation of EVs, a transition that can be a growth engine for the entire British economy". This statement underscores the potential long-term benefits of the current disruption, positioning the UK as a future leader in EV manufacturing.

The Impact of EV Transition on Production

The transition to electric vehicle production is not without its challenges. The retooling of production lines and the implementation of new manufacturing processes have led to temporary disruptions in output. Despite these setbacks, the industry remains committed to its electrification goals.

In the first half of 2024, electrified vehicle production, including battery electric, plug-in hybrid, and hybrid models, accounted for 157,224 units. This figure, while down 7.6% from the previous year, still represents a significant portion (37.8%) of total UK car production.

The decline in production has affected both domestic and export markets. While production for the UK market saw a 17.7% increase to 106,157 units, it wasn't enough to offset the 13.9% decline in export production. This imbalance highlights the importance of international markets for the UK automotive sector.

Export Markets and Global Competition

The European Union remains the largest export market for UK-made vehicles, accounting for 55.4% of all exports in the first half of 2024. Other key markets include the United States, China, Turkey, and Australia, collectively representing 29.4% of overseas orders.

However, the global nature of the automotive industry means that UK manufacturers face fierce competition from other countries also transitioning to EV production. This competitive landscape underscores the need for continued investment and innovation in the UK automotive sector.

Government Support and Industry Outlook

The UK government has made commitments to support the automotive industry's transition to EV production. These include investments in gigafactories, efforts to decarbonize the energy supply, and streamlining the planning system. These initiatives aim to boost the competitiveness of the UK automotive sector and sustain employment in the industry.

Looking ahead, the SMMT expects UK light vehicle production to decline by 9.3% in 2024, reaching around 910,000 units. However, the outlook becomes more positive in the medium term. By 2028, output is projected to recover to just over 1.1 million units, with more than half of all UK car and van production expected to be zero-emission vehicles.

Richard Peberdy, UK head of Automotive for KPMG, offers insight into the challenges ahead: "Huge questions remain unanswered regarding how new electric vehicle sales can be significantly increased from its current level. Market share has somewhat plateaued and private new EV sales are falling so far this year". This observation highlights the need for continued efforts to address consumer concerns and improve EV adoption rates.

Challenges and Opportunities

The transition to EV production presents both challenges and opportunities for the UK automotive industry. While the current decline in production is concerning, it also represents a necessary step towards a more sustainable and technologically advanced future for the sector.

Key challenges include:

• Addressing consumer concerns about EV range and charging infrastructure
• Managing the higher costs associated with EV production
• Ensuring a skilled workforce capable of handling new technologies
• Maintaining competitiveness in a global market

However, the opportunities are equally significant:

• Positioning the UK as a leader in EV manufacturing
• Creating new jobs in high-tech manufacturing
• Contributing to the country's environmental goals
• Attracting further investment in the automotive sector

As the UK automotive industry navigates this challenging transition period, collaboration between manufacturers, government, and other stakeholders will be crucial. Continued investment in research and development, infrastructure, and workforce training will be essential to ensure the long-term success of the UK's EV manufacturing capabilities.

Mike Hawes emphasizes the urgency of action: "Amid fierce global competition, however, industry and government must work quickly to deliver those commitments, creating an industrial strategy that enables the growth the economy craves".

The coming years will be critical for the UK automotive industry. While the current production figures may be disappointing, they represent a necessary phase in the industry's evolution. With the right strategies and support, the UK has the potential to emerge as a global leader in electric vehicle production, driving economic growth and contributing to a more sustainable future.

As the industry continues to evolve, staying informed about the latest developments and trends in UK car manufacturing and EV production will be crucial for stakeholders across the automotive sector and beyond.