In 2016, the UK built 1.7 million cars. Last year, we built just 850,575. This slump in production means the UK has spare factory capacity to build another 750,000 cars at least, even despite losing Honda Swindon last year.
The entire automotive industry has had a rough couple of years, as the Covid pandemic was followed by a semiconductor shortage, and car makers will be hoping to put more cars down production lines - if not in 2022 then definitely in 2023.
If that doesn’t happen, though, the costs associated with overcapacity will make manufacturing cars in the UK uncompetitive for those remaining.
It’s not just the UK struggling with overcapacity. According to research from analyst company Inovev, Europe has enough assembly plants to build around 22 million cars, but last year production fell below 15 million. It estimated the total capacity utilisation rate at just 60%, the lowest in 20 years.
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“Given that the production forecasts are not very optimistic for the decade, manufacturers will have every interest in reducing the capacity of their factories or closing several of their factories,” Inovev said in a March report.
That view was echoed by Stellantis CEO Carlos Tavares at a recent strategy event. Stellantis last year had a plant utilisation rate of less than 60%, Inovev calculated – far too low for a company that's trying to find cost-savings to run 14 brands under the same banner, including Citroën, Fiat, Peugeot and Vauxhall.
Tavares believes the ideal size for Europe’s car market is between 18m and 20m.
“If we continue to remain at about 15m, actions on capacity [ie shutting plants] will be required, because I have to assure the sustainability of this company,” he said at the event.
In the UK, the prognosis isn’t good. Gone is the optimism of 2015, when the SMMT predicted that we would be breaking our 1972 record of 1.92m by 2018. Since then we’ve had Brexit, the pandemic, supply-chain shortages and a fundamental shift in the approach to manufacturing brought about by electrification.
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It's going to happen. With increasing market penetration from the likes of China and S Korea, against a backdrop of slowly falling overall demand for new vehicles amid rising costs and prices, many European car plants will either be reduced in size, shared between brands or just closed down for good.
Bimfam I fear you are right. Besides the competition from the Chinese and South Koreans the UK is not just geographically situated on the edge of Europe but now on the fringe of the supply chain. With batteries being heavy GIga Factories need to be integral or close to assembly plants. Manufacturing at Sunderland looks safe as Nissan has no other production facilities in Europe and CATL’s battery plant Is alongside. Toyota’s Derby and Burnaston plants must be vulnerable beyond the current generation of Corolla especially as the C Class hatchback sector is diminishing and the Corolla Cross Crossover is not going to be assembled at Derby. BMW Plant Oxford looks to be at risk beyond the life of the next ICE MINI hatch - which will be built on a update of the current FAAR platform with the all new Electric MINI production moving to China. Oxford’s savour might be its productivity (despite age of the plant) and with BMW having good sales in the UK it helps them to remove currency exchange fluctuations by manufacturing in countries where they are also exporting to.
I think the nail in the UK car industry coffin was Tesla deciding after Brexit to build their European Plant in Germany.