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The 10.6 per cent decline in new UK car production recorded in July also represents the 14th consecutive month of decline due to weak demand in the EU and Asian markets, trade group the Society of Motor Manufacturers and Traders (SMMT) said.
Car demand has been hit by a number of factors in recent months including sustained uncertainty over a no-deal Brexit from the EU; a slump in sales of diesel vehicles in Europe, and weakening demand in China, the world’s largest automotive market.
The continuing 14-month decline in production and sales terms is now officially longer than the previous record 13-month slump, which occurred October 2008-October 2009 at the height of the last global financial crisis. British car factories produced only 108,239 new cars in July 2019, hit hard by a 14.6 per cent drop in exports, which account for four out of five vehicles manufactured. More positively, production for domestic demand rose by 10.2 per cent, the SMMT said.
“The sector is overwhelmingly reliant on exports and the global headwinds are strong, with escalating trade tensions, softening demand and significant technological change,” said Mike Hawes, SMMT chief executive. “The importance of maintaining the UK’s global competitiveness has never been more important, so we need a Brexit deal.”
July also saw new car sales reach a low point, with Britain buying the fewest new cars since 2012. New car registrations dropped 4.1 per cent year-on-year to 157,198, the lowest number for the month since 2012, while sales for the year to date were 3.5 per cent lower at just over 1.4 million, according to the SMMT. Sales of diesel-powered cars were down by more than a fifth, while petrol car volumes were stable and electric car sales were up strongly, albeit from a low base.
The SMMT attributed the slump to the political and economic uncertainty surrounding Brexit, as well as consumers’ uncertainty about future environmental regulation, all of which serves "to knock consumer and business confidence,” the trade body said in a statement.
The ongoing Brexit fallout has caused investment in British factories to stall, as companies adopt a 'wait and see' approach before making long-term plans. Automotive manufacturers are also faced with significant technological changes in electrifying their range and updating production facilities.
With the Prime Minister Boris Johnson’s controversial decision to prologue Parliament yesterday, severely limiting the amount of time Parliament has left to debate the terms of the UK’s exit, car manufacturers could face serious logistical delays should the UK crash out of the EU with no deal on 31 October 2019. The essential movement of parts and finished vehicles across EU borders could become increasingly laborious and expensive, with some automakers expecting tariffs to be imposed possibly up to 10 per cent.
The SMMT has long been sufficiently concerned about the political crisis threatening the existence of the entire UK car industry that it maintains an active webpage, 'Automotive Brexit Myths - Busted', which details the serious issues already impacting the sector and those yet to come. Virtually the entire automotive sector is convinced that a no-deal Brexit will be devastating to the industry. Some European companies, such as France's PSA Group, are actively considering moving the manufacture of future car models away from UK factories in the event of a no-deal Brexit, while other companies - including Honda at its Swindon plant and Nissan in Sunderland - have already made the switch for certain models to alternative locations outside the UK. Thousands of UK jobs are at stake.
A no-deal Brexit could also cost the sector approximately an additional £4bn per year, according to analytics company GlobalData, accounting for increased costs for components, plus tariffs on vehicles exported to the EU.
There have been some positive developments for the UK car industry, despite the omnipresent spectre of a no-deal Brexit. In July, Jaguar Land Rover (JLR) - the UK’s largest auto-manufacturer - announced that it will build all its electric vehicles in the UK. JLR will make a range of electrified vehicles at its Castle Bromwich plant in central England, beginning with its luxury saloon, the XJ. Batteries for the new electric cars will be made in Hams Hall, Warwickshire, while the electric motors will be manufactured at JLR’s engine plant near Wolverhampton.
Speaking at the announcement in early July, JLR's chief executive Ralf Speth said that the future of the UK car industry hinges "not on Brexit, but on batteries".
This article first appeared on eandt.theiet.org
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