Rise in UK vehicle production suggests global chip shortage could be easing

UK car production rose for the third consecutive month in July, stoking hopes that the industry is starting to recover from the impact of the global chip shortage and the pandemic.

According to the Society of Motor Manufacturers and Traders (SMMT), production was up 8.6 per cent to 58,043 units compared to the same time last year.

In 2021, the UK car industry saw the worst output for the month of July since 1956 as the sector struggled with ongoing staff shortages associated with the ‘pingdemic’ alongside strained supplies of semiconductors.

The chip shortage forced Ford, Jaguar Land Rover, Volkswagen, General Motors, Nissan, Daimler, BMW, Renault and Toyota to shut factories, scale back production or exclude high-end features such as integrated satellite navigation systems, which rely on sophisticated semiconductor technology.

US commerce secretary Gina Raimondo recently warned that the global semiconductor crisis is expected to last through 2023 and perhaps longer as manufacturing still struggles to keep up with demand.

Nevertheless, the SMMT said that the rising number of vehicles produced suggests that component shortages may finally be beginning to ease.

Output still remains -46.4 per cent below pre-pandemic levels, illustrating that full recovery is some way off.

Shipments continue to drive the sector, accounting for eight out of 10 cars made (80.0 per cent), though exports to top markets the EU and US fell, down -7.3 per cent and -22.8 per cent respectively, while orders from China and Japan rose 54.0 per cent and 40.1 per cent.

Mike Hawes, SMMT chief executive, said: “A third consecutive month of growth for UK car production is, of course, welcome and gives some hope that the supply chain issues blighting the sector may finally be starting to ease.

“But other challenges remain, not least energy costs which are increasing at alarming rates. If we are to attract much-needed investment to drive the production of zero emission vehicles, urgent action is needed to mitigate these costs to make the UK more competitive for manufacturing. This must be a priority for the next Prime Minister else we will fall further behind our global rivals, risking jobs and economic growth.”

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