Car industry decline worst since 2001 – here’s why.

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At the end of last month (Aug 2019) UK media reported the British automotive industry had suffered its worst downfall since 2001. According to figures from the Society of Motor Manufacturers and Traders (SMMT), UK car production was down more than 10% year on year in July and, by that point had fallen for 14 consecutive months. This decline was now longer than the 13-month downturn that took place between October 2008 and October 2009 at the height of the global financial crisis. These figures made worrying reading for all of us involved and affected by the industry but how have they come about and what can we expect over coming months?

The short answer to the above question is a perfect storm. There are three main issues that have led us to this situation, we discuss each here.

Doubt over Diesel
Diesel sales in the UK have fallen dramatically over the past few years. This is due partly because of the referendum but mostly because of the now infamous Volkswagen emissions-cheating scandal. The latter led to the government scrutinising all manufacturer’s emissions results, as well as diesel cars overall environmental impact and this then led to drivers understandably becoming more and more cautious about investing in diesel cars. This impacted car sales overall.

US vs China
Last month* also saw Donald Trump hit Twitter with news that from the beginning of September $300bn (£247bn) of imports from China would be hit with a surprise “small additional 10pc tariff,”. “This does not include the $250bn already tariffed at 25pc,” he added. In retaliation, Beijing stated that tariffs of 10pc on US imports would similarly begin at the start of this month. Worse still for those in the automotive industry, it also warned that in December this year the import duty on US-built cars would jump from the current 15pc to 40pc. The warning put the global car industry firmly in trouble and the ripple effect was felt worldwide, not least in our own automotive market.

Brexit breeds uncertainty
We’ve discussed at length in our blog ‘Brexit. What does it mean for the automotive industry?’ (Read more here: https://www.autologistic.co.uk/brexit-what-does-it-mean-for-the-automotive-industry/) the impact Brexit may have on the automotive industry going forward. However, what is clear is that uncertainty around what may or may not happen is already having a detrimental effect. Production has slowed, factories have been placed on reduced hours and less and less investment is being injected into the industry. It goes without saying that this is monumental in the part it plays in the downturn we’re currently witnessing.

In terms of what we can expect moving forward, the future doesn’t look too bright for the automotive industry in the near future. However, solace can be taken from the fact that, although new-car numbers are down, they aren’t down by lots and dealers are still selling cars thanks to consumers’ willingness to take out finance deals. Reassurance can also be taken from the fact that manufacturing bosses are making plans and trade bodies are pushing the automotive industry up the post-Brexit agenda. However, in the UK alone, 856,000 people are employed by the automotive industry meaning further downturn could be catastrophic for many. We’re hopeful that a Brexit deal can be made in time to limit the damage. This just leaves the small issues of diesel doubt and a tit-for-tat exchange between USA and China to tackle.

*https://www.telegraph.co.uk/business/2019/09/01/european-carmakers-getting-caught-crossfire-trumps-trade-war/

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