According to figures published by the Society of Motor Manufacturers and Traders (SMMT), production at UK car plants fell for the tenth consecutive month in March, dropping by 14.4 per cent. The decline was led by sliding demand both at home and overseas market. This prompted the industry to call for political parties to agree on a Brexit deal "urgently", amid fresh warnings that a no-deal Brexit could send output levels back to where they were in the Eighties.
Weak demand for exports due to a slowdown in key overseas markets such as China and Europe continued to knock the beleaguered car sector. Production for exports, which accounts for four out of five cars made in the UK, declined by 13.4 per cent to 99,322 vehicles in the month, compared to 114,697 cars reported in March 2018. Apart from muted demand in key Asian and European markets, model changes and shifting car segment preferences worldwide also contributed to the slump.
Figures from SMMT, the trade association for the United Kingdom motor industry, showed that 126,195 units rolled off factory lines last month, down from 147,505 in the same month the previous year, reflecting falling investment and temporary plant shutdowns due to uncertainty surrounding Brexit. Cars produced for the domestic market also fell by 18.1 per cent to 26,873 from 38,808, leading to the weakest manufacturing activity in the first quarter since 2011.
Production is getting squeezed after years of steady growth due to falling sales in the UK and Europe. On a year-to-date basis, production took a 15.9 per cent blow with 370,289 cars built, while output over the first quarter fell by 16 per cent to 370,289 vehicles. The first quarter is typically the strongest for car makers. The country's car industry had risen from the previous trough of below 1m in 2009 to saw output peak of 1.7m in 2016.
The report cited forecast made by a consultancy which stated that car production would fall by 30 per cent to 1.07m units by 2021 if the UK crashes out of the EU and fall back on World Trade Organization arrangement for a sustained period. The figure would be the lowest level since 1999, at a level consistent with the dark days of the mid-1980s. However, if the UK strikes a deal with the EU that includes maintaining current access to the market, UK car production could be 1.36 million units in 2019, down from 1.52 million in 2018, before rising to 1.42m by 2021.
Mike Hawes, SMMT Chief Executive, noted that a devastating ‘no deal' remains a threat despite a possible exit from the EU delayed until October. He added that the car companies are in "limbo" as the Brexit process remains as uncertain as ever. Companies don't know whether they will face tariffs and trade barriers or the current free trade with Europe will continue. The industry wasted a substantial amount of resources in preparation for Britain to leave the EU in March, including revamping supply chains and planning temporary plant closures. Mr Hawes said that the target of producing two million cars by 2020 seems a distant dream now as Britain's reputation of offering a stable and attractive business environment has been undermined.
Big carmakers such as Jaguar Land Rover, Ford, Toyota, Nissan and BMW have issued warnings about the impact of a no-deal Brexit, supporting the latest independent production forecast which illustrated what's at stake for British car manufacturing following Brexit. Moreover, more than half of vehicle exports go to the bloc, underlying the importance of the future trading relationship with the most important trading partner.
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