Highlights
- Car production in the UK witnessed a decline for the fourth consecutive month amid a shortage of semiconductors.
- The number of cars manufactured in October was at 64,729, while year to date car production declined by 2.9% to 721,505.
Car production in the UK witnessed a decline for the fourth consecutive month amid a shortage of semiconductors. On an annual basis, the car output fell by 41.4% in October 2021, the lowest output since 1956, as per the latest figures released by the Society of Motor Manufacturers and Traders (SMMT).
The number of cars manufactured in October was at 64,729, while year to date car production declined by 2.9% to 721,505. As per SMMT and independent forecast by AutoAnalysis, the full-year car production in the UK is expected to be below 1 million for the second consecutive year.
The primary reason for low car production was the global shortage of semiconductors. New age vehicles, including electric cars, use many chipsets to control almost every function of the vehicle, from power steering to gauge tyre pressure.
Due to the Covid-19 pandemic and lockdown, while many car manufacturers estimated lower car sales, which led to the cancellation of semiconductor orders, there was an increased demand for chips from the IT industry, diverting the whole demand. However, cars sales recovery has been stronger than anticipated leading to demand-supply mismatch and a global shortage of semiconductors. Last month production was also impacted by closure of Honda’s Swindon plant.
Car manufacturing is an important sector that supports the UK economy and employs over 1.2 million people generating over £78 billion a year in revenue. Britain is a manufacturing hub for close to 30 domestic and international manufacturers, including Rolls-Royce, Jaguar Land Rover, and global carmakers like Nissan, Ford.
Let us explore 2 FTSE listed car retailers that might get impacted with low car output:
Motorpoint Group Plc (LON: MOTR)
FTSE All-share listed company operates in the vehicle retailing business. It sells new and pre-owned vehicles of different brands through a network of retail stores and websites. The company reported excellent growth in revenue for the six months ended 30 September 2021 despite the ongoing shortage in supply of new vehicles. Its total revenue was at £605.2 million, while its profit before tax was £13.5 million, a rise of 39.2%.
Motorpoint Group Plc’s last close was at GBX 347.50 on 25 November 2021, with a market cap of £313.41 million.
Vertu Motors Plc (LON: VTU)
The company sells new and used cars, commercial vehicles and also provide aftersales services in the UK. It has a network of 149 outlets in 115 locations. For the six months ended 31 August 2021, the company expects profit before tax of over £50 million driven by high sales of new cars and strong demand scenario. Following a good performance during the period, the company has raised its annual guidance and has re-established its dividend payout policy for its shareholders. However, the overall car retail segment might get impacted in upcoming quarters due to low car production in the UK.
Vertu Motors Plc’s last close was at GBX 61.80 on 25 November 2021, with a market cap of £224.69 million.
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