UK car production fell 32.4% in the first quarter on the back of the continued semiconductor shortage, wiping almost 100,000 units off of last year’s figure. 

Alongside the ongoing global semiconductor shortage, the Ukraine crisis is also exacerbating parts supply challenges and manufacturers are also facing an increasingly challenging economic environment

The new data from the Society of Motor Manufacturers and Traders (SMMT) industry body reveals the first three months of 2022 were down 99,211 units on Q1 2021 – which itself was badly hit by the pandemic. In total, 207,347 new cars were built during Q1 2022, down from 306,558 in Q1 2021. 

Laying bare the impact of the global supply challenges, the data also shows that output for March was down 33.4% to 76,900 units, as a 4.3% rise in production for the UK failed to offset a 41.4% decline in exports.  

While the ongoing global semiconductor shortage is the major issue, the Ukraine crisis is also exacerbating parts supply challenges and manufacturers are additionally facing an increasingly challenging economic environment with rising energy costs and other inflationary factors. 

As manufacturing costs soar, the sector is calling for measures to shore up UK’s global competitiveness and secure the UK supply chain. 

Mike Hawes, SMMT chief executive, said: “Two years after the start of the pandemic, automotive production is still suffering badly, with nearly 100,000 units lost in the first quarter. Recovery has not yet begun and, with a backdrop of an increasingly difficult economic environment, including escalating energy costs, urgent action is needed to protect the competitiveness of UK manufacturing.  

“We want the UK to be at the forefront of the transition to electrified vehicles, not just as a market but as a manufacturer so action is urgently needed if we are to safeguard jobs and livelihoods.” 

Responding to the data, KPMG said that while car production volumes remain below pre-pandemic levels, manufacturers have adapted, profiting from focus on a buoyant electric vehicle market, and prioritising components into higher-margin cars generally – as seen in an 8.2% YoY rise in private registrations in March 2022 compared to a 14.3% fall in fleet registrations.  

The BVRLA has already slammed manufacturers’ moves to prioritise profit margins over fleet market share as “short-sighted” and now KPMG has said that as the market stabilises, a continued focus on such high-margin production will likely be at conflict with maintaining market share – particularly with increased, and lower-cost, competition emerging.  

Chris Knight, automotive partner, added: “A focus on prioritising available components and materials into higher-margin vehicle production and sales has been to the detriment of some parts of the fleet industry. 

“But with rental and leasing markets beginning to recover as travel and commuting again increases, leasing companies will be looking at which manufacturers have, and haven’t, supported them during these challenging times. An increase in hybrid working may of course change the nature of company car schemes forever and lead to less miles driven, but in turn it could drive more consumers, whether supplemented by a vehicle allowance or not, to look at rental options as an alternative to ownership. This was a trend we were already seeing pre-pandemic, particularly in urban areas and amongst younger consumers.  And the tightening cost of living squeeze will only increase the number of people assessing whether short- or medium-term rental or leasing is a more affordable model for them than buying a vehicle.”