Summary
- Britain’s new car manufacturing declined by 48.2 per cent year on year in June
- The export production plummeted by 45 per cent year on year
- UK’s automotive sector has pinned high hopes on free trade agreements
No industry has been left unscathed as the novel coronavirus swept through the United Kingdom. The automotive industry has been facing extremely difficult times and is not just because of the deadly pandemic.
Britain’s new car manufacturing in June was down by nearly 48.2 per cent year on year to similar levels, which were earlier seen decades ago, after the second world war in the 1950’s. Lockdown measures forced the non-essentials retailers, including car dealerships, to close. As the virus spread, almost all factories in the UK halted their production both to protect their workers and in anticipation of the sales crash.
Due to the economic impact of the coronavirus pandemic, a lot of people lost their jobs or have been furloughed. According to a report by the International Monetary Fund (IMF), the real GDP (Gross Domestic Product) of the UK is expected to decline by 10.2 per cent this year (2020). People are looking forward to consolidating and preserving more and more cash due to the prevalent uncertainties in the present scenario. The consumer spending and sentiment both have plummeted substantially. Moreover, as the transition to cleaner, greener technologies is long overdue, people are ready to wait for the next generation cars rather than buying now. The global automotive industry is going through a period of unprecedented change, and weak demand across markets would continue to impact the output.
Also read: UK Car Production Decline By 95.4%, The Country Produces Just 5,314 Vehicles in May
The outbreak of the novel coronavirus has devastated the automotive industry. Social activists and the government are continuously pushing for cleaner emissions technology for the post-pandemic era. The automotive industry was already under the pump in the pre-pandemic era due to added costs, incurred in making a transition to cleaner technologies. It has been a two-fold blow for the car manufacturers, out of which the coronavirus pandemic has demolished the sector hopes in an unprecedented and unseen manner.
According to a recent data released by the Society of Motor Manufacturers and Traders (SMMT), the car production across the UK declined by 48.2 per cent year on year in June with 56,594 units manufactured. However, in recent months, the production has slowly ramped up along with strict social distancing measures due to lockdown easing.
The export production plummeted by 45 per cent year on year in June with 49,924 units made. Moreover, the automotive sector has witnessed more than 11 thousand job redundancies across the verticals of the trade, according to the apex trade body.
UK’s automotive sector had pinned high hopes on a free trade agreement with the neighbouring countries and the United States. According to industry experts, if the UK is unable to strike an FTA by the end of this year (2020), the battered sector could be further burdened with full tariff costs.
UK’s automotive industry is in dire need of seamless access to different markets with free trade agreements and other regulatory requirements. However, these free trade agreements are at a very nascent stage and could take more time in the wake of the novel coronavirus. ‘Together we stand, divided we fall’, a close trading relationship with the strategic partner countries is essential to make a transition to cleaner emissions and protect the industry.
The maximum drop in the new car registrations was seen in the diesel-powered vehicles in the month of June. This drop was followed by petrol-powered vehicles. The reduced numbers imply that conventional technologies are losing out their market share. However, the electric and hybrid vehicles recorded triple-digit growth in terms of new car registrations for the month of June. The private demand was more resilient in comparison to business vehicles for the month of June. In the light commercial vehicle (LCV) segment, the sales dropped by a quarter in June.
The sector witnessed a restart as demand seems to rise from the rock bottom levels as customers are finally collecting their pre-crisis orders. Although, the showrooms in England were allowed to reopen in England from 1 June, 20 per cent of the showrooms remain closed. In addition, showrooms in Wales and Scotland would remain closed until the end of July. The sector was expecting a release in the pent-up demand during the lockdown. The consumer confidence is also looking weak for buying new cars.
During the first quarter of 2020, the luxury carmaker, Aston Martin Lagonda Holdings Plc (LON: AML), recorded a slump of 45 per cent in sales in contrast to the same period the previous year (2019). The company managed to sell only 578 cars to dealerships during the first quarter of 2020. The company saw a sales decline of 86 per cent in the global market for automobiles, China. The company incurred losses of nearly £120 million during the period. Another premium car manufacturer, Jaguar Land Rover, witnessed sales plummeting by 85 per cent in China early this year.
Also read: Covid-19 Impact: UK’s Car Industry Likely to Axe 16.66 Per Cent of Workforce
The automotive sector is currently facing bottlenecks on multiple fronts as they are trying to resurrect while tackling sectoral challenges, which the crisis has unfolded. The figures from the apex trade body, SMMT, paint a very gloomy picture for the industry and its workforce and reveal the difficulties like none other.
The resurrection becomes even more challenging when it comes to making technological advancements at the same time when the businesses are struggling to make ends meet. Uncertain business environment and changes to the fundamental structure in the wake of novel coronavirus makes a recovery even more challenging.
The industry is desperately looking forward to free trade negotiations with the United States and the European Union. The industry is presently facing several headwinds with respect to the uncertainties posed by the Brexit and the carnage caused by the coronavirus pandemic. UK’s automotive industry is a major contributor to the economy, produces and exports cars to the world, and its long-term future now depends on securing a good deal, long-term strategy, and environment conducive of growth to protect several jobs across the country.