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UK Car Industry Sees Record Demand And Production

Figures have shown that car manufacturers in the UK managed to stage a late rally in 2014 to record their best December production results for a decade. This ensured that Britain maintained its record of rising motor output for a fifth year running.

The vehicle manufacturing industry has been a notable success in recent years, with foreign-owned companies such as Jaguar Land Rover attracting large investments and being able to turn out exports to huge international markets such as China and the United States.The UK-based car makers have also managed to produce a quick shift upmarket, with the wholesale value of UK car exports more than doubling over the last ten years, from around £12 billion in 2004 to more than £26 billion last year, on similar export numbers. During those ten years, the average value of an exported car has risen from £10,200 to £21,800.

After uncertainty in global markets such as Russia, a summer of near non-existent production at Nissan’s Sunderland plant due to technical problems, and the launch of a number of new models at Jaguar Land Rover, overall output had been predicted to fall last year. However, a rise of 27 per cent for year-on-year production in December meant that overall manufacturing for 2014 had crept up by 1.2 per cent compared with the previous year to 1.52m vehicles. This was still short of the all-time record of 1.9m vehicles set in 1972. Society of Motor Manufacturers and Traders (SMMT) chief executive, Mike Hawes, said,

“Placed in context, a 1.2% growth in UK car manufacturing in 2014 represents a very successful year. The industry has overcome various challenges, including slower than expected EU recovery and weakness in some global markets. More than £7 billion of investment into UK production facilities has been announced in the past two years, and we are now seeing the effects as new models begin production; with more expected in 2015. UK car manufacturing is now more diverse than ever, with a unique combination of volume, premium and specialist brands giving our products truly global appeal. This is epitomised by the doubling of car export values in the decade from 2005 to 2014.”

Business Secretary Vince Cable also welcomed the news, saying, “These production figures are testament to the strength of our automotive industry, and show that, even in tough economic conditions, it continues to be one of the driving forces behind our economic recovery. From Sunderland to Goodwood, Britain is turning out cars that are in demand all around the world. The UK’s automotive industry is thriving with a new car rolling off the production line every 20 seconds, while increasing levels of investment are helping to secure local jobs. Through the government’s industrial strategy we are backing the automotive industry as it goes from strength to strength.”

Nearly 80 per cent of the cars produced in the UK are exported, with the EU accounting for almost half of total production. Despite six years of unwanted decline, car sales in the EU staged a turnaround in 2014, with registrations up by about 6 per cent.

China can now boast being the second-largest market for UK car exports, at around 12 per cent, compared with just 1 per cent in 2007. Exports to China increased by around 24 per cent in the first nine months of 2014, compared with the same period in 2013.

However, Russia, which is the fourth-biggest export destination behind the USA, has proved to be more of a challenge. Jaguar Land Rover, which is credited for more than a quarter of UK production, suspended deliveries temporarily to the country last month. According to the Association of European Businesses, Russia had endured a 10 per fall in car sales in 2014 and might witness a decline by up to a quarter this year.

Phil Harrold, automotive partner at PwC professional services said, “Russia’s been a disaster in terms of being able to shift metal. The 2014 production figures show the continuing success of UK car production with annual volumes in excess of 1.5 million being maintained. Around 80% of UK car production is exported therefore the success of UK produces is heavily influenced by the economic fortunes of its export destinations. 2014 saw moderate growth in new vehicle registrations in the big three European car destinations; France achieved 1.1per cent growth, Germany, 2.6 per cent and Italy, 4.3 per cent. Spain showed significant growth of 18 per cent, albeit from a low base.”

He continued, “UK car production falls into two categories; volume production mainly aimed at the European market as well as luxury/niche products which service the global economy. This latter category has continued to perform strongly with the US market remaining buoyant. China remains a very strong market for the luxury car exporter. Investment in UK manufacturing continues to grow and 2015 will see a large number of new model launches as well as a commitment from the government to provide £11.3 million of matched funding to the Automotive Council skills development initiative. The key determinants for how the sector will perform in 2015 will be the success of the new Jaguar XE launch as well as the impact of the quantitative easing packages announced yesterday by the European Central Bank. As ever, the key to success in automotive manufacturing rests in having the right product available and a willing and confident car buying market.”

In the UK engine production and commercial vehicle output figures have been disappointing according to data released by the SMMT. The numbers are expected to show a sharp decline on both fronts for 2014.

The production of vans in particular, has been hugely affected by the 2013 closure of Ford’s commercial vehicle plant in Southampton. However, in 2014 there were a number of investments in engine production, such as Jaguar Land Rover’s new manufacturing centre in Wolverhampton, followed by Ford promising a £190m investment for a new diesel engine production line at its Dagenham factory.


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