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SMMT: UK carmakers suffer worst March since financial crisis

·2-min read
Almost 100,000 fewer vehicles were built in the first three months of 2022 compared with a year ago.  (PA Wire)
Almost 100,000 fewer vehicles were built in the first three months of 2022 compared with a year ago. (PA Wire)

UK carmakers suffered their worst March since the financial crisis as manufacturing dropped by more than a third.

The Society of Motor Manufacturers and Traders (SMMT) said shortages of semiconductors – microchips that are fundamental to modern cars – and other components, meant UK carmakers produced just 76,900 cars last month, representing a 33.4% year-on-year drop and the worst March since 2009.

The production squeeze is pushing up prices of new and used cars, as demand remains elevated at a time when supply is struggling to keep up and household incomes are being stretched.

The SMMT said the steep drop in car manufacturing, which was down more than 32% in the first three months of the year to 207,347, was primarily caused by a stark 35% decline in production for overseas markets. That was exacerbated by the closure of a major plant in Swindon in July 2021 that manufactured for the US market.

Car production for the domestic UK market rose by 864 units (4.3%) in March but was down a fifth to 43,548 for the first quarter.

Duncan Tait, the boss of FTSE 250-listed car seller Inchcape, said the supply and demand imbalance was a global issue for the car market, but said it wasn’t negatively impacting his firm.

“Prices are rising and customers are waiting longer for their cars,” he said.

“But we have record order books in each of our global markets across the UK, Europe, Asia, Africa and Central and Latin America, in spite of the semiconductor crisis that is constraining supply.”

Inchcape today upgraded its pre-tax profit guidance for 2022 to “at least” £300 million rather than “around” £300m previously, stating that higher prices and stubborn demand were boosting margins.

The upgrade came despite confirmation of the sale of Inchcape’s Russia business, which contributed £740 million of sales and £47 million of profit in 2021. The impact will be partially offset by Inchcape‘s purchase of Chile-based business Ditec, which should provide £130 million of annual revenue through its distribution agreements with Porsche and Volvo.

Tait added that used car prices, which have surged due to shortages of new vehicles, were likely at their peak and would begin to fall once manufacturing issues caused in part by Covid-19-related backlogs and the war in Ukraine began to ease.

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