UK Car Manufacturing Down in August as Home Demand Plunges

UK Car Manufacturing

Industry figures have revealed significant slumps in the manufacturing of local automobiles in Britain. This is coming on the heels of recent declines recorded consecutively between June and July. The Society of Motor Manufacturers and Traders made this known on Thursday, September 27, 2018. They blamed the troubling statistics on the change in emissions regulations that came into legislation on September 1, 2017.

The ‘quieter summer months’ according to the chief executive of the society Mike Hawes can be ascribed to reduced outputs as manufacturers embark on annual maintenance and re-tooling preparations for new models of their products.

Lower Demand

Data from the industry body reveals a downward slope of 12.9% amounting to 89.254 vehicles churned from assembly lines which are in stark contrast to 102,438 vehicles produced in August 2017. Local demand for British automobiles has been lethargic of late, and this has translated to a dip in production put at 38.8%.

This was ‘exacerbated’ in August following the new WLTP emission-measurement requirements brought into legislation. The industry found itself in a trajectory demanding the recertification of cars to continue to sell them as new models across Europe.

Tougher Regulations

The stringent regulations have prompted a paradigm shift in the range of models being churned out by manufacturers as some have been forced to halt the production of models not conforming to the new regulations.

In line with the new trend, Porsche announced this week its decision to stop selling diesel models because they constitute an infinitesimal fraction of total sales. The company was also reported to encounter technical issues in making some of its brands conform to the new emission regulation.

While local demand has been waning, the trend has been fairer on the export front with an insignificant decline in production output.

72,983 cars were manufactured for export in August 2018 which is just 3.8% lesser to the figures for August 2017.

Analyzing the figures further, four out of every five vehicles churned from automobile factories for August in the UK were manufactured for export.

Brexit

Hawes pointed out the need for a Brexit agreement which was vital in safeguarding trade going by the statistics at hand. This was a discourse dwelt upon when he and a delegation from the SMMT discussed with representatives from EU countries in Brussels last week.

“For our sector, ‘no deal’ is not an option,” he emphasized.

The slump in August production is the highest decline ever recorded in a month. Many thought July would be the worst after production for the local market hit an all-time low of 35% with overall production reduced by 11%.

Summing up the comparison for the year to date figures, the total decline in production is put at 5.2% while the volume of cars churned out for the local market in the first eight months of 2018 was 18.6% lower than what was obtained in 2017.

Leading automobile manufacturer in Britain, Jaguar Land Rover confirmed earlier this month its plans to reduce working hours at its Castle Bromwich plant by adjusting the working schedule of about 2,000 staff.

The company which is owned by the Indian conglomerate Tata thought it pertinent to reduce production hours as it tries to adjust to harsh conditions in the automotive industry which have been exacerbated by Brexit and a slump in demand for diesel-powered cars. The change in working hours is expected to remain and tentatively, change when Christmas sets in.

“In light of the continuing headwinds impacting the car industry, we are making some temporary adjustments to our production schedules at Castle Bromwich,” the statement reads.

In a similar vein, BMW has confirmed its decision to close the Mini factory in Oxford for several weeks following Brexit for reasons it termed as ‘annual maintenance.’ The decision was also borne out of the need to avoid disruption in part supplies as the UK dissolves association with the European Union.

In March, MPs gave a stern warning on the need for the UK government to put the automobile industry at the heart of Brexit negotiations or risk losing thousands of jobs and capital investment in the tune of hundreds of millions of pounds. The select committee of the Business Energy and Industrial Strategy (BEIS) noted the dangers of Brexit to the sector.

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.


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