UK car manufacturing continues to grow

UK car manufacturing achieved its 12th consecutive month of growth in July, rising 7.6 per cent to 126,566 units compared with the same month in 2015, according to figures from the Society of Motor Manufacturers and Traders (SMMT).

Year-to-date production grew 12.3 per cent to 1,023,723 units – the best performance since 2000, and the first time in 12 years volumes have been greater than one million in the first seven months.

Demand was up both at home and abroad with a 14.1 per cent increase in output for the domestic market and exports up 6.0 per cent to 101,184 units. More than three quarters of a million cars built this year are destined for overseas markets, a 77.8 per cent share of total production volumes.

Mike Hawes, Chief Executive, SMMT, said, “UK car production in 2016 is booming, with new British-built models in demand across the world. Manufacturers have invested billions to develop exciting new models and produce them competitively here in the UK. Future success will depend on continued new car demand and attracting the next wave of investment so Britain must demonstrate it remains competitive and open for business.”

A note of caution

These figures paint a very healthy picture of UK car manufacturing; indeed, Mike Hawes used the word ‘booming’, but Chris Bosworth, Director of Strategy at Close Brothers Motor Finance, commenting on the figures, counsels caution. He says:  “Today’s figures for production in the car manufacturing industry continue to emulate the volumes we have seen over the last year, with production and output accelerating at unprecedented levels. However, as figures revealed earlier this week show, there are a number of factors which indicate that this growth may be coming to the end.

“The steady flood of new cars that have entered the market over the last year has resulted in a glut of used vehicles beginning to emerge, with these two or three-year-old cars making consumers gravitate to well-priced ‘nearly-new’ stock. At the same time exchange rate movements makes the UK a less attractive place to sell cars, meaning that manufacturers are less inclined to subsidise finance on new vehicles.

“The outcome of Brexit is also beginning to affect foreign-based manufacturers, with announcements that many are reducing staffing hours, as a result of the fall in the pound from Brexit. This gives UK exporters a boost. However, profits of these firms are likely to fall unless they increase prices of new vehicles – which will again reduce demand-side pressures on UK car manufacturers”.