UK car production plummets to lowest level since 1956 amid chip shortage, worker absences

• The Society of Motor Manufacturers and Traders said Thursday that U.K. manufacturers built just 53,438 vehicles in July, marking a 37.6% drop on July 2020.
• A global semiconductor shortage, factory shutdowns and worker absences amid the ongoing coronavirus pandemic all contributed to the decline, SMMT said.
• Mike Hawes, SMMT Chief Executive, said in a statement that the figures "lay bare the extremely tough conditions UK car manufacturers continue to face."

LONDON — U.K. car production plummeted to a new low last month, marking the worst July performance for the industry since 1956, according to a trade group.

The Society of Motor Manufacturers and Traders said Thursday that U.K. manufacturers built just 53,438 vehicles in July, marking a 37.6% drop on July 2020.

A global semiconductor shortage, factory shutdowns and worker absences amid the ongoing coronavirus pandemic all contributed to the decline, SMMT said.

While July was a particularly bad month, car production across U.K. factories is up 18.3% year-to-date compared to 2020, when Covid restrictions meant people couldn't go to work.

Some 552,361 cars have been built in the U.K. since January, but that's still 28.7% down on 2019 pre-pandemic levels.

Mike Hawes, SMMT Chief Executive, said in a statement that the figures "lay bare the extremely tough conditions UK car manufacturers continue to face."

"While the impact of the 'pingdemic' will lessen as self-isolation rules change, the worldwide shortage of semiconductors shows little sign of abating," Hawes said.

The so-called "pingdemic" referred to people receiving notifications on their phones telling them to self-isolate for several days if they came into contact with someone who tested positive for Covid-19.

Why is the car industry suffering?

New vehicles have dozens of microchips in them to control everything from power steering and car stereos to acceleration and electric windows.

The U.K. is making more electric cars, which have significantly more chips in them, than ever before.

Approximately 26% of the cars built by U.K. manufacturers in July were either battery electric, plug in hybrid, or hybrid electric, SMMT said, adding that this is a new record. It said U.K. car factories have turned out 126,757 of these products since the start of the year.

Several car manufacturers cancelled semiconductor orders at the start of the pandemic because they were concerned about a drop in sales. But when sales recovered faster than expected, the car giants found themselves at the end of the line for chips.

Sweden's Volvo, Germany's Volkswagen and Japan's Toyota all announced this week that they will have to reduce production further if there is not an urgent solution to the chip crisis.

German technology and engineering group Bosch, which is the world's largest car-parts supplier, told CNBC this week that semiconductor supply chains in the automotive industry are no longer fit for purpose.

Harald Kroeger, a member of the Bosch management board, said Monday that supply chains have buckled in the last year as demand for chips in everything from cars to PlayStation 5s and electric toothbrushes has surged worldwide.

The car industry is a crucial cog in the U.K. economy, generating over £78.9 billion ($108.4 billion) a year. Approximately 180,000 people work in manufacturing while 864,000 are employed in the wider supply chain.

Roughly 30 manufacturers are building 70 car models in the U.K. at present. That includes local firms such as Jaguar Land Rover, Vauxhall and Rolls-Royce, as well as international firms like Ford and Nissan.

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