UK annual light vehicle production has risen above one million units for the first time since 2019.

Eight all-new models entered production in 2023, including at the newly reopened Ellesmere Port EV-only plant

A total of 1,025,474 units – spanning 905,117 cars and 120,357 commercial vehicles – were produced in 2023, rising 17.0%.

The Society of Motor Manufacturers and Traders (SMMT) said the figures reflect the easing of pandemic-related challenges, from chip shortages to lockdowns, and increasing electrified model production.

Strong December performances for both car manufacturing, up 20.7% year on year, and CV volumes, up 80.3%, rounded off a positive year, which saw a revival of the industry’s fortunes. Eight all-new models entered production in 2023, including at the newly reopened Ellesmere Port EV-only plant, while some £23.7bn of private and public investment commitments were made – more than in the previous seven years combined – from Cowley to Sunderland; gigafactories to R&D facilities.

These commitments will drive green economic growth, create jobs nationwide and transition the sector to electrified vehicle manufacturing, which has already hit record levels in 2023. UK production of battery electric (BEV), plug-in hybrid (PHEV) and hybrid (HEV) vehicles soared to 346,451 units, up 48.0% on the year before to account for almost two fifths (38.3%) of overall output.

The sector also received a boost at the very end of 2023 with the deferral of tougher rules of origin for batteries and EVs traded between the UK and EU. The move will help safeguard the competitiveness of the sector in the UK and Europe, providing valuable time for local battery and associated component production to ramp up.

The latest independent outlook foresees UK car and light van output rising by around 3% in 2024 to 1.04 million units with the potential to exceed 1.2 million units by the end of this decade.

However, the SMMT has said that the UK must now ramp up its EV supply chain and deliver return on investments to ensure continued momentum.

Mike Hawes, SMMT chief executive, commented: “Receding supply chain challenges, new model introductions and a massive £23.7bn of investment put UK vehicle production firmly back on track in 2023. Industry will now focus on the delivery of these commitments, transitioning the sector at pace to electric and scaling up the supply chain. With global competition as fierce as it has ever been and amid escalating geopolitical tensions, both government and industry must remain singularly focused on competitiveness, with all the jobs and growth this will bring. We are in a much better position than a year ago, but the challenges are unrelenting.”

The SMMT is calling on the Government to use the upcoming Budget to introduce measures that will boost the sector. These should include extending Climate Change Agreements so electric vehicle battery-manufacturing and its associated supply chain are eligible for relief; making green energy widely available and affordable; delivering on commitments to improve grid connections; and taking action to close critical labour and skills gaps.

KPMG has also warned of continued challenges for the automotive sector.

Richard Peberdy, UK head of automotive, said: “Domestically, fleet buying has driven the growth in the UK new car market, while consumer demand has failed to grow year on year. Higher interest rates have not only pushed up mortgage costs, but also the cost of car finance. Insurance prices have also risen, amongst several higher outgoings that households face. This financial landscape is undoubtedly suppressing and changing consumer car buying decisions and that will continue until the squeeze of household finances loosens.

“Four in five UK automotive executives are concerned about the impact of this economic landscape on their business in 2024. But nearly nine in 10 interviewed as part of KPMG’s Global Automotive Executive Survey are confident in the industry’s ability to achieve more profitable growth over the course of the next five years.”