At ENL Group we work closely with automotive manufacturers across the UK, supplying a range of high-quality plastic components for their vehicles.
This is a hugely important sector for the UK economy, and we are proud to play our part in it. However, we also know from speaking to our customers that the last few years have been hugely challenging for the industry.
The list of challenges seems to be almost endless.
Shortages of semiconductor chips, supply chain disruptions caused by Covid, reduced consumer demand, and new legislation on emissions have created a difficult operating environment. And that is before we even consider the complexity that new post-Brexit rules created for the sector.
The latest data from the sector paints a mixed picture. It suggests that having weathered the storm of the last two years, there are early signs that the UK’s motor manufacturing sector is starting to bounce back. However, significant challenges do remain.
The latest figures released by the industry point to several trends that businesses in the automotive supply chain need to be aware of.
Production Figures
Even though sales are increasing, production continues to fall, though this is largely due to relatively short-term issues.
According to the Society of Motor Manufacturers and Traders (SMMT), there was a 32% fall in UK car production in the first quarter of 2022, a decline of almost 100,000 vehicles.
207,347 new cars were built during the first quarter. This compares to 306,558 in the first quarter of 2021 when we were still dealing with the restrictions caused by Covid.
So, what is driving the continuing squeeze on production?
Well, industry trade body, the SMMT believes that the key cause is the continuing global shortage of semiconductor chips. There was also an impact resulting from the closure of Honda’s Swindon plant in July 2021 and model changes that have caused production lines to close.
Electric Vehicles on the Rise
We have written before about the rise of electric vehicles in the UK. Looking at the latest sales data, it appears that this trend is continuing.
SMMT figures show that at the start of the year battery electric vehicles (BEVs) accounted for one in 11 cars made in the UK, as their production rose 37.6% to 6,326 units.
Including plug-in hybrids and hybrids, electrified vehicles now account for more than a quarter of output (27.4%, up from 25.4% in 2021).
We would expect this figure to keep climbing. At ENL we are already active in this market, making housings for battery-powered vehicles. We anticipate that this will be an area of future business growth for ourselves and other suppliers.
Exports
The first quarter of 2022 saw big falls in production for export to overseas markets. These falls were higher than the size of falls seen in domestic markets. Falls to export markets declined by 35% and for domestic markets by 20%.
However, overseas markets still accounted for more than seven in 10 cars manufactured, showing the importance of exports to UK car manufacturers.
Despite the challenges of Brexit, the EU remained the main destination for UK-made cars, taking 67% of exports. This was followed by the USA (8.2%) and China (6.6%).
Market Demand
Although figures around production show a sector that is still dealing with challenges around supply chains, particularly when it comes to semiconductor chips, there are reports of increased demand from consumers on forecourts up and down the country. This is giving some cause for optimism about the long-term strength of the sector.
Wider Economic Factors
However, given the condition of the wider economy, and increasing prices for households, there are concerns that as we move forward consumers may become reluctant to commit to major purchases such as a new car.
It is important to remember too, that inflationary pressures are felt by manufacturers as well as consumers. Costs of raw materials are rising along with pressure on wages for staff. The challenge for manufacturers will be finding ways to either absorb those costs or pass them on to consumers who are already feeling the squeeze.
The Role of Supply Chains
Strong, reliable, and flexible supply chains are a key element in the success of the UK automotive sector. At ENL Group, we are part of those supply chains, producing plastic components that are used in both traditional and new electric vehicles.
One of the lessons of the last two years has been the need for UK businesses to onshore their supply chains, to minimise the risks of the sorts of disruptions caused by Covid and Brexit.
We are playing our part at ENL, but we believe that there is scope for UK manufacturers to do so much more. The UK content of British-based cars is around 41%. However, the SMMT calculates that as much as 80% of components could be made in the UK. If that step change was achieved, it would be transformational for the 2500 UK companies in the automotive supply chain – adding over £4 billion to the national economy.
Achieving this will be driven by the purchasing practices of major manufacturers but government has a key role to play too. More support for companies that supply the automotive sector would be great news for the UK economy, creating new jobs, and ensuring that the sector is resilient when it comes to supply chain disruption.
About ENL Group
ENL Group is based in Portsmouth, UK, and Veľké Kostoľany, Slovakia. Established in 1958, we have been servicing UK-based and European companies for decades. Working with a secure supply chain, ENL provides quality components for quality-driven customers – with full certification for all of our products and quality checking at every stage.
Operating 24/7, we design, manufacture, and deliver critical components for our customers across the UK and Europe.
Contact Us for more information about ENL and how we can help your business.
