It wasn’t long ago we explored what Prime Minister Liz Truss could potentially bring to the car industry. There were calls for more support across the sector as production and sales have slowed significantly. However, after a short stint at number 10, Truss’ replacement, Rishi Sunak, now steps in to take the reigns.
But what does this mean for the auto industry?
So far nothing has drastically changed in light of the recent political upheaval, which leaves experts asking what the government will do to help improve the economy. The cost of living crisis is still biting, and as Christmas and the New Year approaches, the landscape doesn’t look optimistic for the motor sector, at least for the short term.
Car manufacturing output decline
While it was reported that August’s car sales grew for the first time in several months, there was a stark comparison for car output in September. According to figures from the Society of Manufacturers and Traders, car production was down 6%. This decrease follows four months of growth in manufacturing – and is primarily blamed on extensive supply issues in the sector.
Overall, car production is down 47.7% compared to the same month pre-Covid in 2019. Plus, exports declined as fewer shipments went to the EU, US and Chinese markets.
The rise in electric car manufacturing
The overall picture of the car industry might look bleak. But, there is some good news, particularly from the EV sector. The UK’s production of electric, hybrid and plug-in hybrid cars saw an upward development – with BEVs rising 16.6%.
With this progression in the market, electric vehicles represented one in seven cars produced in September. Exports of UK EVs are also in demand, with just over 78% shipped abroad.
Calls for support from the government
The car industry has faced several challenges in recent years, and the problems are still ongoing. However, with advancements in the electric vehicle market remaining strong, UK companies remain resilient despite the setbacks.
However, industry leaders and experts are calling on Rishi Sunak to provide more support and a clearer growth strategy.
By putting in the correct framework, the UK could bring more investment into the sector, particularly for the growing EV market. Without this, it may stagnate or even decline, putting the country behind others in the electric revolution.
Chief Executive of the Society of Manufacturers and Traders, Mike Hawes, said: “Stability, combined with a plan that tackles critical skills shortages, delivers regulatory certainty and brings down the cost of energy in the long-term can help put the UK at the forefront of next generation automotive manufacturing.”
Car manufacturers pulling out of UK production
The call for additional support in the sector can’t come soon enough as movements in the industry are starting to take shape. Car manufacturers are rethinking strategies, and due to rising costs and supply issues, some are deciding to move production elsewhere.
For example, BMW recently announced that its Mini electric hatchback would now be produced in China, which moves its production from Oxford.
The UK’s hopes of becoming a battery and manufacturing base for EVs are also in the balance as companies such as start-up Britishvolt are considering the sale of its main cell factory. Jaguar Land Rover is also in talks with a Slovakian company regarding assembly in the country.
Electric vehicle company Arrival recently announced that jobs could be at risk as it’s relocating its van production to the US. While it’ll still have a base here, the company said it would make ‘sizeable’ reductions in the workforce. This comes after cuts made in the summer to focus on electric van production.
Consumers holding back on EV purchases
Another sticking point for the industry is that sales are not coming as expected. While the electric car market is growing, there is concern the cost of living crisis, including higher energy bills, is hampering consumer confidence in purchasing more expensive EVs.
Under previous PM Liz Truss, energy prices were capped for the next two years. Of course, Chancellor Jeremy Hunt then quashed this. Now the scheme will end in April 2023. This announcement has caused concern for consumers and businesses, as the potential increase could see the energy prices rise again when people are already feeling the pinch.
Buying an electric vehicle is more expensive than a conventional car. But adding the rise in electricity charges could cause hesitancy in buying.
Another incentive for EV drivers that is rumoured to be scrapped is the exemption from road tax. It’s possible the Chancellor will announce the introduction of car tax to EV and plug-in hybrid drivers from 2025 in the Autumn Budget. If it goes through, this will leave a sour taste for EV drivers, on top of already rising living costs.
There’s also the flip side for car manufacturers already battling supply issues. A hike in energy bills will make costs overall increase for the consumer. This makes it more challenging for carmakers to keep up with the latest innovations, as fewer are likely to buy at inflated prices. There’s also the worry that some electric start-ups may feel the pinch even further and shut up shop to move elsewhere or ultimately curtail production.
So, what are the government’s plans for the car industry?
As yet, there is yet to be a clear pathway or strategy to support the auto sector. However, the government does have ambitious goals for a greener future. That said, without investment in the EV sector, meeting these targets would fall by the wayside.
Unfortunately, it’s unclear when the next round of announcements on support for businesses will happen. But, as the budget nears, consumers will undoubtedly be waiting to see how the government is set to help (if at all) with the cost of living and motoring.
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