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UK made fewer cars in April amid chip shortages

·Finance Reporter, Yahoo Finance UK
·3-min read
UK car production  A technician works in the assembly line of German carmaker Volkswagen's electric ID. 3 car in Dresden, Germany, June 8, 2021. REUTERS/Matthias Rietschel
UK car production for overseas markets fell by 20.8%, driven by a 68% decline in shipments to the US and a 10.4% drop to Asia. Photo: Matthias Rietschel/Reuters

Fewer cars rolled off the assembly lines in April as the ongoing global shortage of semi-conductors and the war in Ukraine led to a “volatile” month for the UK car industry.

A total of 60,554 cars were built, 11.3% fewer than last April, according to figures from the Society of Motor Manufacturers and Traders (SMMT).

Other issues included vehicle model changes and broader industry structural changes, said the organisation.

Read more: UK inflation heading for 14% for poorest households

Six-in-10 cars exported headed to the EU, representing a 5% uplift in shipments, while production for the UK grew for the second month in a row, up 60.1%.

This increase was driven primarily the result of new models coming to market, attracting buyers into showrooms.

Production for overseas markets fell by 20.8%, driven by a 68% decline in shipments to the US and a 10.4% drop to Asia.

“The UK car industry is exposed to a host of issues that are undermining output and competitiveness. Global chip shortages and supply chain disruption are exacerbated by spiralling energy costs, additional trading costs and slowing global markets,” Mike Hawes, SMMT chief executive, said.

“The foundations of the sector are strong and the transition to zero and ultra-low emission vehicles continues apace but we need more policies and measures that support manufacturing and encourage investment into the UK at this most challenging of times.”

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The figures show that, despite the tough economic backdrop, UK car makers continue to shift focus towards the latest battery electric, plug-in hybrid and hybrid vehicles.

More than one-in-four (26.4%) cars made in April was electrified, equivalent to 16,010 units, up 2.1% on the same month a year ago.

Chris Knight, automotive partner at KMPG, said: "Consumer demand for new cars remains high despite the cost of living crisis, but supply shortages mean that manufacturers still don't have the ability to produce cars at pre-pandemic volumes, and won’t for some time.

"Car makers have pivoted, focusing production on higher-margin vehicles - which has proved so profitable that tough decisions lay ahead about whether they want to return to the old model of high volumes and extensive discounting. Smaller and lower margin cars have become less attractive to car manufacturers.

"With consumers experiencing long wait times for lower-margin vehicles there is certainly an opportunity for car makers that are able to ramp up production of lower cost vehicles. For example, Chinese entrants to the European market may feel that this is a market gap they can seize upon, especially for lower price electric vehicles.

"Incumbent OEMs need to be mindful of how these dynamics will shape the competitive landscape in the years to come."

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