UK car production plummets to lowest level since 1954

Car production in the UK has fallen almost to its lowest since 1954 last year, with some 779,584 units rolling off British production lines in 2024, 13.9 per cent down on 2023.

Only during the extraordinary conditions of the pandemic and its associated lockdowns was activity at a lower ebb.

It is a confirmation of the frailty of both consumer sentiment at home, and of the weakness of world demand, given that around eight in every 10 cars made in Britain were destined for export.

Sales to the largest overseas market, the European Union, and to China, were down by about a quarter and a fifth respectively. One bright spot was sales to the buoyant American market, up by 38.5 per cent, possibly boosted also, to some degree, by fears of future tariffs.

The Society of Motor Manufacturers and Traders (SMMT), the industry body, also stressed that the changeover to making electric vehicles has also affected the numbers.

The SMMT points to factories retooling for changeover to battery electric vehicles (BEVs) as a temporary reason for the slowdown in the factories.

Jaguar and Nissan are two marques preparing to launch a new generation of electric cars to meet the demands of the zero emission vehicle mandate, which means that sales of new petrol and diesel cars will be reduced to 20 per cent of the market by 2030, with complete phase-out of fossil-fuel powered models, including hybrids, following in 2035.

Commensurate investment in battery production in new gigafactories are going ahead. As things stand, the UK ranks slightly below Slovakia in the global rankings, and is dwarfed by the Chinese industry, which, on the latest data, has now risen to an annual output of a dominant 27 million units, more than the United States, Japan, India and Germany combined.

Mike Hawes, chief executive of the SMMT gave an upbeat assessment of the situation, although British output is only expected to edge up in 2025 and to reach 1 million again in 2030.

He said: “Amid significant geopolitical and trade tensions, UK manufacturers are set on turning billions of pounds of investment into production reality, transforming factories to make new electric vehicles for sale around the world.

“Growing pains are inevitable, so the drop in volumes last year is not surprising. With new, exciting models and battery production on the horizon, the potential for growth is clear.

“Securing this future, however, requires industrial and trade strategies that deliver the competitive conditions essential for growth amidst an increasingly protectionist global environment.”

Increasingly ambitious official targets for sales of BEVs are costing the car makers dear - some £4bn in penalties and additional costs to meet the BEV quota of 22 per cent of all their car sales in 2024.

Mr Hawes described the situation, which has led to significant distortions in the new car market, as “unsustainable”, with no sign of matters improving in 2025, when the BEV quota rises to 28 per cent of sales.

Car companies who fail to sell sufficient BEVs are then effectively charged £15,000 for every petrol or diesel model they sell - a significant sum even for upmarket makes.

If such a position continues it would mean car companies will be forced to sell fewer models with internal combustion engines, restricting overall supply and pushing prices higher.

The fundamental problem is persistent resistance to go electric among private buyers; most BEVs are sold to business and fleet buyers taking advantage of significant tax breaks.

After the closure by the Stellantis Group of the Vauxhall plant in Luton last year, the government announced a review of the zero-emission mandate. The initial consultation is due to be completed by February 18th, and any change in policy might be seen in the summer.

Mr Hawes said that he hoped ministers would show more “flexibility” in the design of the zero-emission mandate, perhaps taking into account sales of part “electrified” full hybrid models, as in the EU.

He also repeated a plea for more economical public charging points for BEVs, given still elevated electricity tariffs, and more incentives for sceptical buyers. He welcomed the £65m the Chancellor, Rachel Reeves, has committed to “kerbside” charging points.

Brexit continues to exert a depressing effect on the automotive sector, which, as ever, would welcome any relaxation of trade barriers with the EU, which remains a major source of components, skills and investment for the UK, as well being the major export destination.

But, it is fair, to say, the bright optimism shown by the British car industry in the early 2010s has given way to uncertainty and nervousness.