Why Has UK Auto Manufacturing Collapsed 24% in Three Years?

81% of the vehicles are exported; they can be built anywhere. Honda is leaving. Nissan may be too. Vauxhall may be shuttered. Jaguar Land Rover offshored some production. But EV production soared.

By Nick Corbishley, for WOLF STREET:

Auto production in the UK slumped by 14.2% in 2019 to 1.3 million units, the lowest since 2010 when the industry was grappling with the fallout of the Global Financial Crisis. Five years ago, UK car production was growing and on target to hit 2 million units a year by 2020, beating the record set in 1972. Instead, it has slumped for the past three years in a row, in total by 24% since 2016, according to the industry group, the Society of Motor Manufacturers and Traders (SMMT):

How important is auto manufacturing in the UK’s total manufacturing sector? According to the SMMT, automakers in the UK employ 168,000 people (1 in 14 of total manufacturing employment). Automakers also support an additional 279,000 jobs in the UK. Annual salaries are typically 21% higher than the average across all UK employment. And “in regions such as the North East and West Midlands, automotive accounts for more than one in six manufacturing jobs.”

The industry faces a litany of problems, including the broad, ongoing shift away from diesel across Europe, shifting production to other countries, significant model production changes, low confidence in the UK economy, sliding demand at home and overseas, and Brexit-related issues.

81% of the vehicles are exported; they can be built anywhere.

Production for domestic sales dropped 12.3% in 2019, to 247,000 vehicles. Production for export dropped by 14.7% to 1.056 million vehicles, with overseas orders still accounting for 81% of the vehicles assembled in UK plants.

The manufacturers with the sharpest production declines in 2019 compared to 2018, were:

  • Honda: -32%
  • Nissan, the second largest car manufacturer in UK: -21%
  • Vauxhall (UK’s Opel, subsidiary of French automaker PSA): -20%
  • Jaguar Land Rover (JLR), UK’s largest car manufacturer: -14.5%.

Honda and Nissan have plants around the world and can build vehicles anywhere.

Even JLR has plants in multiple countries, including in the EU (Slovakia), India, China (joint venture with state-owned Chery Automobiles), and Brazil. In 2018, JLR shifted production of its Land Rover Defender from the the UK to its assembly plant in Slovakia, where it cashed in €125 million of investment aid from the Slovakian government.

Toyota was the only major manufacturer to increase production. It builds the Corolla in the UK, and output rose 15% to 148,106 vehicles.

The uncertainty surrounding the long-dragged-out Brexit process bore much of the blame for the downturn. Fresh inward investment in the sector has plunged while factory shutdowns in April and November, timed to deal with expected disruption from the UK’s departure from the EU (which in the end didn’t happen until Jan. 31, 2020), also had a “marked effect” on production. In April alone, output tumbled by 45% year over year.

EU countries remain the UK car industry’s most important market. Although exports to the bloc fell by 11% in 2019, its share of exports actually increased by 2 percentage points, to 55%, since exports to the UK auto industry’s other three biggest markets fell by either a similar amount or more: the U.S. (-10%), China (-26%), and Japan (-17%).

“Given the uncertainty the sector has experienced, it is essential we re-establish our global competitiveness and that starts with an ambitious free trade agreement with Europe, one that guarantees all automotive products can be bought and sold without tariffs or additional burdens,” said SMMT Chief Executive Mike Hawes. “This will boost manufacturing, avoid costly price rises and maintain choice for UK consumers.”

Hawes is right, of course: the more that further disruption to the industry’s connections with mainland Europe can be avoided, the better. But the problems and challenges facing the UK’s car industry go far beyond Brexit. They include the broad consumer shift in both the UK and the EU away from diesel vehicles to gasoline-powered cars and to a smaller extent, to EVs. And EV production has taken off a few years ago: in 2019, EV production surged by 35% to 192,304 units — now accounting for 15% of total UK production.

The diesel backlash.

The diesel backlash is the legacy of the 2015 Dieselgate scandal, with prosecutors dragging ever more manufacturers into court. The UK government’s response was to pledge that by 2040 all diesel and gasoline powered vehicles will have been replaced by electric vehicles. Some cities have already passed local legislation either banning some or all diesel vehicles, or making it much more expensive to drive them. Demand for diesel cars has collapsed on both sides of the English channel. And car companies, left with little other choice, are halting their production.

This shift is causing mayhem for global automakers. In the last couple of years alone, UK-based manufacturers have axed the following models, three of which — the Vauxhall Corsa, Honda’s CR-V and the Toyota RAV4 — were hugely popular:

  • Fiat Chrysler Automobiles: Fiat 500X, all models by 2022
  • Honda: CR-V
  • Kia: Rio, Venga
  • Mitsubishi: ASX, Outlander
  • Porsche: Macan, Panamera
  • Seat: Toledo
  • Skoda: Fabia
  • Suzuki: Vitara, SX4 S-Cross
  • Toyota: Avensis, RAV4, Verso
  • Vauxhall: Corsa
  • Volvo: All new models

Although Britain’s largest automaker, Jaguar Land Rover, is not on the list, it is more exposed to the diesel market than just about any other company. In 2017, 90% of its sales in Britain, its largest market, were diesels. Last May, the company declared its biggest ever annual loss, of £3.6 billion, partly due to a sharp slowdown of sales in China. Global retail deliveries fell 5.8% to 578,900 vehicles, and global revenues fell 6.1% to £24.2 billion. The company has since laid off 5,000 workers, most of them in the UK (after shifting production of its Land Rover Defender to Slovakia).

Which automakers are on the way out?

Honda, which suffered the biggest slump in UK production in 2019 (-31%), unveiled plans to exit the UK completely by 2021, leading to the loss of 3,500 jobs and ending a manufacturing relationship that began in 1989. Its exit will remove a key element of the Japanese manufacturing influx that filled the void left behind by the collapse of stalwart UK manufacturers in the ’70s and ’80s.

Concerns are rising that Nissan, whose production in 2019 plunged by 21% and whose massive plant in the North East accounts for almost one third of UK auto production and employs over 7,000 people, could follow Honda out of the UK. The struggling company has already announced that it will not be building the X-Trail sport-utility vehicle at its Sunderland plant. In October, it suspended all overtime at the plant.

Fears are mounting that Vauxhall could shutter its Ellesmere plant after its owner, France’s PSA Group, agreed to merge with Fiat Chrysler. And Ford is also expected to reduce its UK workforce.

Honda’s sudden exit from the UK and Nissan’s gradual retreat are likely to be as much a result of the trade treaty Japan signed with the EU in 2018, which includes a commitment to gradually reduce EU car duties on imports of Japanese cars from current 10% to zero in 2027, as they are of Brexit. The UK was always seen by Japanese car firms as a strategic stepping stone into the EU market, but with Brexit taking place at virtually the same time as the passage of the EU-Japan trade deal, its usefulness as a manufacturing base has significantly diminished. By Nick Corbishley, for WOLF STREET.

President AMLO put it this way: “There may be no growth but there’s development and well-being, which are different.” Read…  Global Slowdown, Internal Issues Hit Mexico: GDP Drops for First Time Since 2009

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  58 comments for “Why Has UK Auto Manufacturing Collapsed 24% in Three Years?

  1. Feb 3, 2020 at 1:31 pm

    This is the year the UK went over the halfway mark in renewable energy. They had 18 coal free days last year, with plans to build new wind and hydro. As the UK leaves the industrial age (to China) we may lament their economic loss, while they exit the malignant global financial system. DJT may wish he could pull this off, but our empire hasn’t declined enough.

  2. Iamafan
    Feb 3, 2020 at 1:51 pm

    Other than China (or maybe the USA), other countries do not have the internal market big enough or wealthy enough to fully support local production. That’s why Japan, So. Korea, and Germany export their cars.
    Not sure if anyone cares about James Bond cars anymore.

    • Cas127
      Feb 3, 2020 at 6:28 pm

      “do not have the internal market big enough or wealthy enough to fully support local production.”

      The key role of internal mkt size and economies of scale has been horribly ignored in US, until about 12 years after China started eating our lunch.

      As with FX Dynamics and devaluation, for many decades the US simply did not have to concern itself with the details of intl trade very much (always the last chapter in econ textbooks…)

      Now we really, really, really do.

      For instance, DC “elites” have been tremendously out-thought by the Chinese leadership for 20 years.

      • sierra7
        Feb 4, 2020 at 12:21 pm

        Cas127:
        Cheaper labor. Not very complicated.

        • Feb 4, 2020 at 9:18 pm

          Ah, but you forgot about the negligible labor laws!

        • char
          Feb 5, 2020 at 3:17 pm

          No.

          For scale you need a big economy and the economy is for a big part wages. Cheap labor is low wages so does not create a big economy.

    • char
      Feb 3, 2020 at 8:39 pm

      Car companies see the EU as one country and one market and USA as two (Rules in California are different from those in Alabama)

  3. CreditGB
    Feb 3, 2020 at 1:56 pm

    Did we ask this question when the US auto production moved off shore?
    Manufacturers using offshore production are beginning to find that the cheapest isn’t always the cheapest.

    • Shiloh1
      Feb 3, 2020 at 4:59 pm

      Want to see how GM does with China Flu.

      • Cas127
        Feb 3, 2020 at 6:29 pm

        Probably fine unless it hits Mexico…

        • char
          Feb 3, 2020 at 8:41 pm

          A lot of sub parts of a car are made in Wuhan.

  4. Freewary
    Feb 3, 2020 at 2:28 pm

    Can anyone give me a reason to buy a car made in the U.K.?

    • capt.harry
      Feb 3, 2020 at 3:26 pm

      they are know for inventing the oil leak

    • wkevinw
      Feb 3, 2020 at 5:24 pm

      Aston Martin, Rolls Drophead

      My wallet can’t support them, but they can get you into the fast lane pretty nicely.

    • VintageVNvet
      Feb 3, 2020 at 5:39 pm

      Of course old Bean, happy to do so: One must always remember the joy to be had by a motoring gentleman while tinkering with the carburettors, preferably while the rest of the family picnics, a what? Ah yes, the endless joy trying to balance them so that the beast runs at all, and we are not to ever hope or mention runs well. I remember it well from the first of these horseless carriage vehicles I owned, a 56 Triumph with the twin carbs.

      • Gold is just..gold
        Feb 3, 2020 at 11:33 pm

        I spent more time under my Wolseley 6/80 than in it.

    • char
      Feb 3, 2020 at 8:48 pm

      A lot of Ford engines are made in England so maybe you are driving British and a mini is fun.

      • Freewary
        Feb 4, 2020 at 7:57 am

        Great suggestions guys

        @ Cap Harry YES – oil leaks! to horrify me enviro friends. might be worth it just for that

        @ wkevinw if I were forced to by a UK car, it would be a classic Rolls

        @VintageVNvet sorry I just cant get into carbse Carbs seem like antiques to me- so far always fuel injection. I love the FI merc 616 engine I might drop one into my classic rolls

        @Gold yes this is what I fear with UK cars. . . I heard about this

        @Char – no fords- only classic Mercedes for me

        • Dan Romig
          Feb 4, 2020 at 9:17 am

          My favorite car to listen to, and drive, was a ’75 280Z. That was the first year Datsun went to fuel injection.

          A six-pack of Weber DCOE 40 mm side draft carbs replaced the FI. Adding an MSD ignition and a set of 6-2-1 exhaust headers finished with a decent attenuating (but free flowing) muffler worked great.

          Sound came out of the engine bay too as the Webers let the valve train sing when the butterflies were open.

          Even though I could afford to buy my dream car, the TVR Griffith, made in Whiteley, Hampshire, I am too frugal to splurge on one.

          Two weeks ago, I did buy a British turntable, arm & cartridge from Rega which were made in Essex. And a Graham Slee moving coil phono stage made in Little Houghton.

          I chose the Rega over a US made VPI, a German ClearAudio and an Austrian Pro-Ject ‘table. All four manufactures make outstanding gear!

    • Mike G
      Feb 4, 2020 at 3:52 pm

      Lucas electrics, the Prince of Darkness

  5. WES
    Feb 3, 2020 at 3:01 pm

    It is interesting that Europe choose diesels inspite of its higher cancer risks.

    The politicians by taxing milage basically forced the choice of diesels.

    Now diesels are considered politically incorrect!

    • Gandalf
      Feb 4, 2020 at 3:25 pm

      Europe chose diesels because they gave higher mpg, and the air pollution controls were rigged by VW and others to give fake numbers to make them respectable. This fakery was not ever discovered in socialist Europe until the air quality control folks in the People’s Republic of California outed it

      Gasoline engines can also get much higher mpg than they do now, but the problem for both diesel and gasoline engines is that at the more efficient levels of operation, both spew out high levels of NOx, which is an oxidizing agent that can only be reduced by reacting it with fuel or fuel-like reductants. Gasoline ICE currently are programmed to run fuel rich mixtures to reduce the NOx to minimal levels. The catalytic converters then react off the excess hydrocarbons and carbon monoxide in the exhaust.

      That’s why max fuel mpg for cars dropped so drastically in the 1980s from the 40-50mpg to today’s 18-30mpg levels

      Diesel engines generally used a urea liquid to reduce the NOx. This made the mpg numbers look great but adds to the cost of operating a diesel engine car, which is why the rigged emissions controls happened – to allow the diesel engines to spew NOx and not use up the urea except when the engines were being tested by an emissions control tester

    • Prof. Emeritus
      Feb 5, 2020 at 9:05 am

      Diesel technology was a big revolution in the late ’90s with the introduction of common-rail injectors – corporate lobbyists were pushing diesels a lot.
      Although with the addition of all those emission control technology diesels may once again be safe – but now who’s willing to buy a car that requires 3 kind of emission reducing additives, a regeneration drive on a regular basis and huge running costs? Customers may not have profited from diesels, but the likes of VW, Bosch, Peugeot, Continental, BMW, Delphi, etc. did produce huge numbers thanks to diesel sales.

  6. Petunia
    Feb 3, 2020 at 3:13 pm

    In the big cities Uber has replaced car ownership. It’s much cheaper and more convenient now to use car services. Also, car ownership doesn’t carry the prestige it once did.

    • Just Some Random Guy
      Feb 3, 2020 at 3:57 pm

      I rarely take Uber but when I do I see nothing cheap about it. Last time I took one was $35 to go about 12 miles. That’s almost $3 a mile vs the average cost of car ownership $0.50-60/mile.

      • Petunia
        Feb 3, 2020 at 6:04 pm

        I don’t use Uber and don’t live in a big city, so I really don’t know what they charge. I see the fashionistas I follow using Uber and cabs in all the big cities, as opposed to their own cars. These women can afford expensive things but don’t really care about owning cars.

        The last time I parked a car in a NYC garage it cost me $45 and that was twenty years ago. I still have the sticker shock. So your $35 Uber ride doesn’t sound expensive to me.

    • simont23
      Feb 4, 2020 at 1:23 am

      What rubbish. Nothing will replace personal independent transport unless it is forced on us. The Uber drivers I talk to all say their best customers are poor people spending money they don’t need to spend.

      • Feb 4, 2020 at 11:49 am

        simont23,

        “The Uber drivers I talk to all say their best customers are poor people spending money they don’t need to spend.”

        Oh lordy, how would Uber drivers even know this? And how would you even talk to Uber drivers if you used your “personal independent transport.”

  7. Iamafan
    Feb 3, 2020 at 3:19 pm

    Outside the US, diesel is usually cheaper because they are taxed less. So they export gasoline to us while we export our diesel to them. They love asthma.

  8. Just Some Random Guy
    Feb 3, 2020 at 3:32 pm

    $8 gas in London makes driving not very appealing would be my guess.

    • Feb 3, 2020 at 4:26 pm

      But wait… 81% of the vehicles manufactured in the UK are exported to other countries — including Jags to the US. So the fuel price in London doesn’t explain anything in terms of manufacturing cars in the UK.

      • char
        Feb 3, 2020 at 9:12 pm

        Britain is not the home market for most of the car manufacturers Only for JLR and Austin is the UK their home market but especially JLR makes big cars who need a lot of fuel to go. Gasoline is way to expensive to fuel a Land Rover in the UK, Even for people who buy a Land Rover. So after the effective diesel ban the JLR buying public bought something more aerodynamic that drove on gasoline (probably something German)

      • andy
        Feb 8, 2020 at 2:22 am

        Cars may be just so 20th century.
        Cars are expensive, highly taxed, revenue tax targets (purchase, rego, fuel, insurance, parking, even fines for wayward drivers).
        And for what? To sit in 2 hours free parking on your local freeway going nowhere in the morning commute.
        The world is moving on – car share, ride share, e bike, bike, ride, run, scoot, better metro, denser living, e-work, and internet shopping with free delivery.
        There will always be cars, but for those that must have one, maintenance cost saving on EVs will probably be the death knell for ICE.

  9. Realist
    Feb 3, 2020 at 4:09 pm

    The big question is wether the factories will be retooled when new models are to be introduced or simply shut down.

    • char
      Feb 3, 2020 at 9:19 pm

      They will be closed

      Europe has to many car factories. Only Honda has no other European car plants IIRC but Honda is a nobody in Europe so they will likely use their EU-Japan free trade treaty.

  10. Javert Chip
    Feb 3, 2020 at 4:25 pm

    I assume ratification of USMCA trade deal, requiring significantly more “North American” content in automobiles to qualify for lower tariffs, has something to do with it.

    When a comprehensive USA-UK trade deal (perhaps integrated into USMCA?) is done this may mitigate some of the decline.

    Automobiles seem to be in a cyclical decline at the moment; perhaps that and the drawn-out BREXIT just created too much risk in the UK.

  11. R2D2
    Feb 3, 2020 at 4:29 pm

    To be fair, Germany’s car production has shrunk -15% in the past 4 years, as has Canada’s. The UK is not alone.

    Jaguar (Tata), the UK’s biggest carmaker, is the main cause of the UK slowdown. It piled ~90% into diesel cars, just as the world’s governments told everyone to pile out…

  12. akiddy111
    Feb 3, 2020 at 5:01 pm

    U.K. Auto Manufacturing collapsed 24% in 3 years because Tesla is projecting to grow revenues 41% next quarter. Elon Musk is a hero. Silicon Valley needs heroes for it’s socially awkward tech fanboy population. Tesla is a must have. Just like the I phone.

    Nobody cares about UK Autos. Everybody wants to own a Tesla. Stock is up another 20%. Easy riches for everyone.

    • Feb 3, 2020 at 7:44 pm

      I know you’re kidding, as your alias tells me you are. But if you weren’t akidding, I’d say, “what awesome gobbledygook.”

      • Thomas Roberts
        Feb 3, 2020 at 9:50 pm

        Oh Wolf, one day the power of Tesla will become apparent to you, and you will be overwhelmed. A fan boy you will become.

  13. raxadian
    Feb 3, 2020 at 5:10 pm

    In one word: Brexit!

  14. otishertz
    Feb 3, 2020 at 5:18 pm

    Bumper sticker seen on an MGB in the 1990’s:

    “All parts falling off this car are of the finest brittish workmanship.”

    • simont23
      Feb 4, 2020 at 1:25 am

      British car manufacturers have 23 different words for sorry, and they don’t mean any of them.

  15. Otishertz
    Feb 3, 2020 at 5:31 pm

    I don’t get how EV companies like Tesla are seen as Green when they get free pollution credits that they then sell to polluters to maintain or increase thier unrelated pollution. Take into account that Tesla, up 20% on the day right now, would have shown a loss last quarter without selling free credits that allow pollution.

    What a sham and where is Ralph “unsafe at any speed” Nader the Corvair killer on the consumer hazzards of spontaneous human combustion vehicles. Where is the NTSB on autopilot crashes that kill people?

    • Otishertz
      Feb 3, 2020 at 6:45 pm

      Tesla enables the pollution of other unrelated companies when it sells its credits to them, in effect creating pollution where there was none before. They get free credits and sell them to more noxious direct polluters, increasing overall pollution.

      They got those pollution credits without doing more than filling out forms. The pollution credits didn’t exist before they made new EV cars – with thousands of flashlight sized batteries – that primarily rely on coal fueled electricity. Do they get a debit on their “green ledger” for the disposal of lithium batteries?

      Does anyone else see the ridiculousness here?

    • Feb 3, 2020 at 7:51 pm

      Otishertz,

      When it comes to buying a vehicle, Americans don’t give a crap about “green.” They buy what they WANT to buy. The F-150 is the most popular vehicle in the US. SUVs are hot. No one cares about green. Why the heck should EV buyers suddenly care about green, when F-150 buyers don’t? Americans buy EVs because the LIKE them. People really need to get a grip on this.

      • otishertz
        Feb 3, 2020 at 8:07 pm

        Yep, no one gives a crap. There’s a Tesla in outer space after all.

        • otishertz
          Feb 3, 2020 at 8:15 pm

          … a Tesla car just floating around up there… Increasing sattelite debris.

          Golly, and shucks.

  16. Mean Chicken
    Feb 3, 2020 at 5:43 pm

    Nobody wants anything but a Tesla, obviously.

    As far as heavy trucks go, Volkswagon thought Navistar was under priced for their purposes, so they bought the company. What’s the plan, certainly they didn’t buy Navistar for the purpose of retiring diesels to the scrap heap of history?

  17. John seddon
    Feb 3, 2020 at 7:11 pm

    With regard to the U.K. automotive sector. Nissan are now playing the long game having announced that they will look to move their EU operations to the U.K. if the EU fails to reach an amicable Non tariff trade agreement with the U.K . Their reasoning is quite simple. Nissan U.K. is a very efficient producer. The U.K has a pool of skilled automotive labour. The decline of sterling against the euro makes the U.K. attractive for global exports plus margins on U.K. automotive sales historically have always been higher than in most of the EU. Brussels are living the nightmare that if they drive to hard a trade deal, the U.K. will walk away and become the Monte Carlo of Northern Europe. In effect a low tax country diverting inward investment from the EU. Nissan can benefit both ways.

    • char
      Feb 3, 2020 at 9:34 pm

      Nissan’s marriage to Renault is going through a very ruff patch. I would not be surprised if they left the European market.

    • fajensen
      Feb 4, 2020 at 9:27 am

      Sure, “#they need us more than we need them” … never gets old!

      Isn’t it time to follow tradition and move on to the stalking phase of the relationship?

  18. Stan Sexton
    Feb 4, 2020 at 2:23 am

    Honda’s only plant in Europe is the old Spitfire aircraft plant and that’s where the Civic Type R is made for the whole world. Where will the Type R be made after the plant closes?

    • Gandalf
      Feb 4, 2020 at 5:42 pm

      The Honda Civic hatchbacks imported to US are all made in the Swindon UK, not just the Type R

      Honda is closing the UK factory in 2021

      Honda sold some 325,000 Civics in the US in 2019, its top selling model, beating the Accord. No figures as to how many were hatchbacks and type R vs sedans but the great majority of Civics I see on the streets are hatchbacks

      The other Civic models are made in Honda plants in Indiana and Ontario Canada, so most likely the UK Civic production will get shifted there

  19. DanS86
    Feb 4, 2020 at 10:54 am

    Anyone remember the Austin-Healey? The government killed UK’s native car companies. And now The Bern may do the same in the good old USA.

    • Feb 4, 2020 at 11:14 pm

      Remember the last time we were in a massive bubble and automakers wouldn’t make anything but SUV’s and then gas prices jumped to $4/g and we had to bail them out? They’re fully capable of driving themselves out of business, even in a country that coddles them.

    • char
      Feb 5, 2020 at 3:36 pm

      I always assume that Ford and Chrysler are commuting suicide and GM is planning to do it. No Bern needed

    • Social Nationalist
      Feb 5, 2020 at 4:26 pm

      Bern is irrelevant.

Comments are closed.