UK automobile production drops by over a quarter due to chip shortage

Car manufacturing in Britain fell by 27% year-on-year to 37,200 vehicles in August, according to the British Society of Manufacturers and Dealers of Automobiles (SMMT).

While the production of cars for the domestic market over the past month slightly increased by 3.3%, export vehicle production fell dramatically by 32.5%. Around 29,200 cars assembled in the UK were shipped overseas, with exports to major markets including Australia, the US and China down over 50%. Exports to the EU were in better shape, representing nearly seven in every 10 cars exported in August, but still slid 4.9%.

The plunge in exports was brought about by the continuing global shortage of semiconductor chips leading to production disruptions, as well as some carmakers’ summer factory shutdowns.

However, since the start of the year, overall UK car production is up 13.8% compared to last year, increasing to 589,607 vehicles. This was largely driven by export-focused production with 83.2% of cars manufactured heading for foreign markets.

SMMT Chief Executive Mike Hawes expects production constraints to continue through 2022.

“Another significant decline for UK car production is extremely worrying both for the sector and its many thousands of workers nationwide. While not the only factor at play, the impact of the semiconductor shortage on manufacturing cannot be overstated.

“Carmakers and their suppliers are battling to keep production lines rolling with constraints expected to continue well into 2022 and possibly beyond,” Hawes said, as quoted by The Guardian.

In March, SMMT predicted that car production in the UK would start its post-pandemic recovery this year, forecasting 15.8% growth from 2020 with 1.05 million vehicles and a further increase in output to 1.1 million in 2022. However, experts say there is little chance of the UK reaching the 1.3 million production level from pre-pandemic 2019 any time soon.

Meanwhile, across the Atlantic, US auto sales have also nose-dived lately, with industry estimates predicting at least a 24% decline in September as the chip shortage continues to disrupt production worldwide.

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