According to the latest data, in the latest blow for the UK automotive industry, car production in the United Kingdom fell by 18.2 per cent in January, marking an eighth successive month of decline. The industry is facing many challenges, both domestic and international. It has been hit by falling demand in China, increased regulatory oversight and action against diesel vehicles in Europe and rising uncertainty about Brexit, which has halted investments in the country.
The Society of Motor Manufacturers and Traders (SMMT), the trade association for the United Kingdom motor industry, said the steep fall in output was mainly due to a slowdown in production for export to China and the EU. Production fell to 120,649 vehicles last month, a fall of 26,858 units, with output destined for export was down by 21.4%. Additionally, production destined for China fell by 72% compared with the corresponding value in 2018 while for the EU it decreased by 20%. Michael Hawes, SMMT's Chief Executive Officer, remarked that another consecutive month of contraction was a "serious concern".
The shrinking demand from China - car sales fell during 2018 for the first time in almost 30 years - has been cited by many European carmakers as the reason behind fall in output in recent months. Car production in the United Kingdom in 2018 also fell to a five-year low, due to a decline in new investment prompted by fears of a no-deal Brexit. According to figures by SMMT, last year, 1.52m vehicles were produced, a decrease of 9.1% over the previous year. Production for the domestic market also declined by 16.3%. The industry saw investments falling by about 50% to £588.6 million, which was blamed on Brexit uncertainties by the SMMT. Publicly announced investments hit their lowest levels since 2012.
The auto industry is going through a slew of changes, ranging from declining demand in major markets to increasing global trade tensions. There are also technological changes faced by the market, driving structural changes across the industry. Around 80% of all the cars produced are destined for overseas markets, making the local manufacturing industry heavily reliant in export demand. Analysis by SMMT shows that two-thirds of total car exports are intended to market which come under preferential trading arrangements, including the EU and the US. Without a favourable deal in place, these trading relationships will have to come under World Trade Organization terms, causing a significant setback to the industry. Moreover, the EU, which bought half of the UK's car exports during 2018, will no longer be freely accessible to the UK's exports post-Brexit.
On top of all, domestic uncertainties are hurting the local market and production. The unpredictable environment has led to many manufacturing companies shifting their production facility outside Britain. Last week Honda, a Japanese carmaker, announced its plan to close its Swindon plant in 2021 which employs 3,500 colleagues. Similar announcements have been made by Jaguar Land Rover, Vauxhall and Ford as well in recent months. Though not every manufacturer cited Brexit behind their decision, Germany's Schaeffler said that Brexit was an important factor behind their decision to move jobs abroad.
The country's once-booming car industry has been under severe pressure for the past few months. Though Brexit has played a significant role in this decline, structural changes across the industry are to be blamed as well. The British industry will have to adapt itself to the technological developments to remain competitive in the world market. The administration will have to make sure that post-Brexit terms of trade do not put the industry at a disadvantage.
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