UK car manufacturing falls by 37.6% and could cost £8.2bn

Can manufacturing in the UK fell by 37.6% in March according to figures  from the Society of Motor Manufacturers and Traders (SMMT). A total of 78,767 vehicles left factories that mostly proceeded to shut down due to COVID-19 Coronavirus as lockdown was announced on March 23rd.

That’s a drop of 47,428 compared to March the year before, but expect an even bigger decline to be announced for April as car production braked to a complete stop. First quarter car production in total for the UK was down 13.8% to 319,252 compared to 370,289 for Q1 in 2019.

Showrooms around the world closed and demand was particularly weak in major export destinations including the US and EU where many markets were shut down – exports fell 39.3% and 37.7% respectively, although shipments to China tentatively rose 2.3% as lockdown started to ease there.

With the spread of the pandemic around the world, global vehicle sales in March 2020 fell by 39% compared to the March 2019 according to JATO Dynamics, a global automotive data company. This surpasses even the global financial crisis of November 2008 which saw a 25% drop.

Overall, the worldwide total for the first quarter of 2020 already highlights a reduction of 26% for Q1 2019 with sales decreasing to 17.42 million units.

China, Europe, and the US all posted double-digit declines in March. However, Europe was hit the hardest, with the lowest number of sales for March in 38 years. The passenger cars registrations for Europe-27 comprised of 848,800 units, down by 52% compared to March 2019. This result follows declines in January and February, taking the quarterly volume down to 3.04 million units.

“This downward trend is not simply due to the restrictions of free movement. The industry is being impacted largely by the uncertainty for the future, and this issue started to arise even before the pandemic took hold” said Felipe Munoz, JATO’s global analyst.

He continued “we have to remember that the industry was already operating in a challenging environment, especially towards the end of last year. The trade wars, lower economic growth and tougher emissions regulations came long before the COVID-19 crisis. And unlike previous recessions, we’re not just dealing with people’s fears or purchase delays. This time we have to consider that consumers are simply unable to leave their homes.”

While China, Europe, and the US all posted double-digit declines in March, Europe was hit the hardest, with the lowest number of sales for March in 38 years. The passenger cars registrations for Europe-27 comprised of 848,800 units, down by 52% compared to March 2019. This result follows declines in January and February, taking the quarterly volume down to 3.04 million units.

Back in the UK the latest independent analysis suggests that the crisis could result in a loss of some 257,000 units this year across all UK plants if factories stay closed to the middle of May. This amounts to an estimated cost to industry of some £8.2 billion, equivalent to around 20% of UK car makers’ combined annual turnover.

With more than a quarter (26.0%) of all companies responding reporting cash reserves of less than three months, and 29.3% projecting recovery to take between 12 and 24 months, Mike Hawes, SMMT Chief Executive, 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.”

With some key export markets, including China, Germany and the US, now starting or planning to re-open, manufacturers in the UK are making detailed preparations for employees to return safely to work over the coming weeks. 57.0% of businesses said they plan to resume operations by mid-May.

While Japan, Korea and the CIS countries recorded very low decreases, things have improved in China where in February sales shrank by a staggering 79% year-on-year. However by March, according to the statistic released by the China Association of Automobile Manufacturers, production resumed to 75% of the 2019 yearly average.

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