UK car output hit as semiconductor shortage continues to plague auto sector

·4-min read
An employee works on the production line at the Nissan car factory in Washington, northern England. Photo: Nigel Roddis/Reuters
An employee works on the production line at the Nissan car factory in Washington, northern England. Photo: Nigel Roddis/Reuters

Car production in the UK increased in May from last year, however, it continues to be held back by a global supply shortage of semiconductors.

On Friday, the Society of Motor Manufacturers (SMMT) revealed an output of 54,962 vehicles last month, up 934% on the 5,314 vehicles produced in May 2020 as the country was under lockdown.

This was still down 52.6% on the same month in 2019, and 58% lower on the five-year average. So far this year UK factories have turned out 429,826 cars, up 105,063 on last year, a 22.9% fall on the same five-month period in 2019.

“May’s figures continue to look inflated when compared to last year’s near total standstill of production lines. The recovery of car production is, however, still massively challenged here and abroad by global supply shortages, particularly semiconductors,” SMMT chief executive Mike Hawes said.

The global chip shortage spans across the globe and has put pressure on a number of carmakers who are competing directly with tech companies and the consumer electronics sector for supply.

At the beginning of the pandemic, many car manufacturers cancelled orders due to fear of a long downturn in sales. However, as sales have started to recover they have now found themselves at the back of the queue for these microchips.

The entire global car industry buys approximately $37bn (£26.5bn) worth of computer chips.

Read more: The chip shortage bringing car factories to a standstill

Jaguar Land Rover (JLR), the UK’s largest car manufacturer, was plunged into fresh crisis earlier this year as the shortage caused it to temporarily shut down production at two of its main plants.

The company, which is owned by India’s Tata Motors (TTM), said it would have a “limited period of non-production” at its plants in Castle Bromwich in the West Midlands and Halewood on Merseyside.

Nissan (7201.T) also announced that it would furlough around 10% or 800 employees at its UK plant in Sunderland amid the supply chain issues.

US car company Ford (F) announced that it will cut car production due to the global chip shortage and said profits could be hit by $1bn. Renault (RNO.PA) and Honda (HMC) also flagged similar plans, with the latter previously pausing production at its Swindon plant. General Motors (GM) warned that it could face a $2bn profit hit.

Watch: COVID-19: Chip shortage throws spanner in the works as car industry struggles to recover from coronavirus crisis

“These global supply chain issues serve to underline the importance of an effective domestic industrial strategy. To boost the car industry and support jobs, Labour would bring forward ambitious proposals to spark an electric vehicle revolution in every part of the country,” Ed Miliband, Labour’s shadow business secretary, said.

“Labour backs our manufacturers and communities with proud histories in the industry, and we would invest in securing the industry’s future. But the government is asleep at the wheel.”

The SMMT also revealed that just one in 16 cars made in Britain are electric, while battery electric and hybrid vehicles represented 19% of cars made in the UK last month.

The lack of electric models comes despite Britain confirming that it was banning all petrol and diesel cars by 2030, and hybrid cars by 2035 as part of the government’s green industrial ­strategy.

Read more: UK plans to ban new petrol and diesel vehicles by 2030

UK car production continues to be export-led, with 83.6% of all cars built so far in 2021 shipped overseas.

The European Union remains the most important destination for British cars, taking 56% of all exports, followed by the US (18.3%) and China (7.3%).

Hawes added: “If the UK is to remain competitive, therefore, it must ensure it has a globally attractive policy framework for both vehicle production and the supply chain.”

“Accelerating zero emission car production is part of this package, so while one in five models made here this year is alternatively fuelled, we need to drive investment in research and development, charging infrastructure and the market to ensure we can deliver the net zero future society demands.”

Watch: How is the ongoing semiconductor crisis delaying the recovery in the auto industry?

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