Home Business Insights & Advice Is the UK car industry in trouble?

Is the UK car industry in trouble?

by Sarah Dunsby
22nd Oct 18 10:22 am

The car industry in the UK is no longer booming as much as it used to. Once a part of the country’s national identity, car brands Rolls Royce, Bentley and Jaguar are no longer British brands. BMW now owns Rolls Royce, the Volkswagen Group has absorbed Bentley and Tata Motors is now Jaguar’s parent company.

There is still a sizeable number of cars produced in the UK, with companies like Honda, Nissan and Toyota operating plants where thousands of workers are employed. In addition, these manufacturers intend to produce some of their models in the country. After the financial crisis, the industry bounced back in terms of production figures, but with the disruption and uncertainty caused by Brexit, manufacturing is waning again.

Consumers aren’t buying as many cars as before either. In 2017, new registrations fell to 2.54 million from 2.69 million the previous year. By 2019, the figures are expected to fall even further. While the troubles with the car industry have been attributed to unsuccessful Brexit negotiations and the weak pound, there are other factors that come into play.

For one, ride-hailing apps like Lyft and Uber have been made popular by shorter commuter times. There’s also the PCP car loan trend which analysts believe have plateaued even as they’re worried it has produced a problematic bubble in the industry; something they fear is similar to what happened with the housing market prior to the crash.

In addition, buyers are learning to be more careful about which cars they buy. More and more people from UK are doing a vehicle history check with sites such as vincheckpro.com. It only makes sense as people want to know that whatever vehicle they buy will last a long time without giving them any trouble that will cost money. More people are looking to cut spending as household savings hardly exists and indebtedness of the average household is reaching extreme highs.

Consumers aren’t the only wary ones as investors are being more careful as well. Toyota’s European president, Johan van Zyl, warned that if the environment wasn’t “conducive for doing business, we will not invest.” The company has been a long-term investor, having been around for 25 years, but that would mean nothing if the UK isn’t lucrative for them anymore. Losing foreign investment would be disastrous for the UK automobile industry as it has come to rely on it.

Another crucial point of concern is continued trade with the European Union, which has been the largest importer of UK cars. In 2016, 1.7 million passenger cars were manufactured in the country and 78.8% of that was exported. Depending on how Brexit turns out, this could be bad news for the industry. The margins are huge too. According to the Society of Motor Manufacturers and Traders (SMMT), EU countries got 56% of our exports followed by the United States who got only 14.5% of UK vehicles. Next was China, taking 6.5%.

The worst possible scenario that could happen, as far as Brexit is concerned, is for us to have a no deal Brexit. If that happens, the UK would have no choice but to adopt WTO rules for international trade, resulting in tremendous negative effects on the car industry.

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