Article Source: IMechE
UK car production fell 37.6% in March, which ended with the country in lockdown amid the Covid-19 pandemic.
Almost 50,000 fewer cars left factory gates compared to the same month last year, according to new figures released today by the Society of Motor Manufacturers and Traders (SMMT). The total was 78,767 – down 47,428 – as the coronavirus caused UK plants to close, resulting in more than 140 days-worth of total production lost.
The lockdown came into effect on 23 March, raising the possibility that the figures for April could be even worse. The sector has already been hit hard in the last year, with concerns and issues surrounding Brexit linked to many consecutive months of falling production.
In March, output for the domestic market declined 36.8%, while exports fell 37.8% as showrooms closed around the world. Demand was particularly weak in major export destinations including the US and EU, where many key markets were shut for the majority of the month. Shipments to China increased 2.3% as lockdown measures there began to ease, but overall output for the sector was down 13.8% for the first quarter, with 319,252 vehicles leaving factory gates compared with 370,289 in the same period in 2019.
The crisis could result in 257,000 fewer cars produced this year across all UK plants if factories stay closed to the middle of May, the SMMT said. That would amount to an estimated cost to industry of about £8.2bn, equivalent to roughly 20% of UK car m/akers’ combined annual turnover. The organisation said the outlook could be much worse if subsequent demand is weak, and the speed at which production lines are able to ramp up is constrained. The body called for car retail premises to “open as soon as the situation allows”.
Any efforts to re-open major parts of the economy will be tightly controlled, amid fears that easing lockdown measures could lead to a second peak in infections.
SMMT chief executive Mike Hawes said: “UK automotive is fundamentally strong but, as these figures show, it is being tested like never before, with each week of shutdown costing the sector and economy billions. Government’s emergency measures are helping keep many companies afloat and thousands of people in jobs, but liquidity remains a major concern and will become even more stretched as the industry begins to restart.
“To get production lines rolling, we need a package of measures that supports the entire industry. We need co-ordination and collaboration with government, the workforce and wider stakeholders to unlock the sector in a safe and sustainable way. This will include new workplace guidance, additional measures to ease cash-flow and help furloughed colleagues back to work, as well as demand-side measure to help encourage customers back into the market. This should be seen as long-term investment into the underlying competitiveness of an industry critical to the health of the economy and the livelihoods of thousands of households right across the UK.”
The SMMT also published the results of a survey looking at the impact of Covid-19 on UK automotive. The closure of showrooms across the world has forced car plants to pause operations for more than a month and the impact on turnover has been severe, with half of surveyed manufacturers reporting revenue drops of more than 50%.
Government schemes, including the Coronavirus Job Retention Scheme (CJRS), have reportedly provided a lifeline for many businesses, with almost two-thirds (60.6%) of the full-time automotive manufacturing workforce furloughed, safeguarding thousands of highly skilled jobs.
Although business interruption loans are starting to pay out, just 17.0% of applicants reported success, with 58.0% of respondents stating they were either ‘ineligible or unsuitable’.
With 26.0% of all responding companies reporting cash reserves of less than three months, and 29.3% projecting recovery to take between 12 and 24 months, the SMMT said more needs to be done to get cash flowing and to “help the sector get back to business.”
Manufacturers are making detailed preparations for employees to return safely to work over the coming weeks. 57.0% of all businesses responding to the survey said they plan to resume operations by mid-May but there are some key challenges that need to be overcome. Two thirds (66.7%) highlighted UK market readiness as a pre-requisite, while almost half (48.9%) called for more flexibility in the CJRS to allow for short-term working during production ramp-up.
The SMMT identified four ‘pillars’ for a successful ‘restart’ of the sector – re-opening automotive retail and stimulating demand, ramping up safe and sustainable production, securing and supporting resilient supply chains, and ensuring a supportive regulatory framework is in place.