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UK car production drops on weakening demand

The latest report from the Society of Motor Manufacturers and Traders (SMMT) has revealed that car production in the UK fell over the first quarter of 2013. The fall has been attributed to tough economic conditions across Europe but SMMT has indicated that it expects output in the industry to recover.

The latest report from the Society of Motor Manufacturers and Traders (SMMT) has revealed that car production in the UK fell over the first quarter of 2013. The fall has been attributed to tough economic conditions across Europe but SMMT has indicated that it expects output in the industry to recover. Figures show that the number of vehicles produced in the UK during the first quarter fell by around 2% to 393,410. March suffered particularly badly, with figures down 6.3% to 126,900. Production of commercial vehicles experienced the sharpest drop during March, with the number of units manufactured dropping by 18.7%. Engine production was down by 6%.

The figures for commercial vehicles will be particularly worrying to the government as they have an obvious link to the broader health of industry. The report comes as the Office for National Statistics (ONS) revealed data which showed that the UK economy had narrowly missed dropping into a triple dip recession, with growth figures of just 0.3% for the first quarter of 2013. This modest recovery was driven for the most part by a stronger services sector. Manufacturing production on the other hand rose by just 0.2% in the same period.

The SMMT pointed at an early Easter weekend and extremely weak demand for new cars across the Eurozone countries to explain the first quarter contraction in UK car manufacturing. Despite the gloomy figures, SMMT chief executive, Mike Baunton, predicted that the situation was likely to improve even over the remainder of the year. He said: "Despite ongoing difficult market conditions, UK automotive manufacturing is expected to grow overall in 2013 and beyond, fuelled by significant investment from global automotive companies." Obviously manufacturing figures do not equate to UK car sales figures and here the UK market continues to be robust.

The UK market has been a notable exception to the wider European picture of declining sales and Britain has managed to buck that trend by recording increased car sales for the 13th successive month in March this year. During this period, new car sales in the UK rose by nearly 6% in comparison with registrations for March 2012. This was in stark contrast to Europe's other major economies, with sales in Germany and France falling by 17% and 16.2% respectively. UK car manufacturers will attempt to reverse the first quarter drop by concentrating on emerging markets like China and India, along with the key US market. Traditionally UK luxury brands have performed particularly well in these areas.
 

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