Semi conductor shortage

Semi conductor shortage slows car production

UK car production hits a 65-year low as chip shortages pile pressure on the battered sector

Fewer than 900,000 vehicles rolled off production lines in 2021, the lowest level since 1956, as factories slowed down or stopped work while scrambling to obtain scarce semiconductors.

The impact of the shortages – which is being experienced by manufacturers worldwide – is expected to reduce later this year but continue to have some effect even into 2023.

If that is resolved the industry still faces a growing challenge from a surge in energy costs of up to 70%, according to the Society of Motor Manufacturers and Traders (SMMT)

Just 859,575 vehicles rolled off UK production lines in 2021, down by about 60,000 or 6.7% from 2020 and 34% below 2019 levels.

A lack of chips, thanks to government shutdowns in the Far East, meant factories had to slow down or even stop production.

The chips form a critical part of modern car making, with each vehicle typically having 1,500 to 3,000 – but there was also disruption to the import of other components.

Staff shortages due to government regulations and showroom closures during 2020/21 took their toll too, as did the permanent shutdown of the Honda car plant in Swindon during the summer, which accounted for about a quarter of the annual decline.

The semiconductor shortage is thought to have knocked 100,000 off total volumes and early estimates suggest it could mean a smaller but still significant 50,000 hit for this year.

Car manufacturing numbers are however expected to see a recovery overall and hit over a million units in 2022.

But it is a far cry from the 1.5 million plus total seen in 2017, a high water mark for the industry in recent years – and a number that the industry admitted was unlikely to be reached again any time soon unless a major new factory opens or existing plants bump up production.

There was also an uptick for hybrid and electric production, now representing a quarter of the total.

Some manufacturers bucked the overall UK decline, with production of BMW-owned Mini in Oxford and the Toyota Corolla in Burnaston increasing compared with 2020.

But car makers, like other sectors, face additional challenges from surging energy costs – which could rise by 70%, with the industry not currently eligible for discounts given to so-called “energy intensive users” such as the steel sector.