Times are tough but the future is bright for car building in Britain

Ever had one of those days where everything seems to go wrong, or worse, a year like Queen Elizabeth II’s annus horribilis in 1992? Things are even worse for the UK car industry.

It’s suffered a decade of doom since the 2016 Brexit vote made European trade harder and choked off inward investment. Car makers then suffered the shockwaves of Covid-19 lockdowns throttling supply and demand,
and the Ukraine war inflating energy costs. 

Now industry figures are grappling with the impact of a 25 per cent tariff on car exports to the United States. All the while electrifying the cars and vans its factories produce to meet unpredictable consumer demand. Politicians have been pushing them hard, but the UK government has listened by slackening ZEV mandate rules.

You could imagine the UK’s car factories are glum places. Not so Bentley’s historic Crewe assembly plant, where passionate colleagues showed me around the three-billion-Euro, self-funded transformation that’s establishing a new production line, logistics base and design centre.

“I think the people see there’s a clear commitment from our side to Crewe and our workforce. They see that in uncertain times we are investing in the future,” Andreas Lehe, the boss of manufacturing, tells me.

It’s equally vibrant at the UK’s biggest car plant, Nissan Manufacturing UK in Tyne and Wear, where the country’s first gigafactory is tripling in size to feed three new EVs starting production in the next three years. 

It’s a similar story at JLR: its Indian owner Tata is building a gigafactory in Bridgwater, Somerset, and reconfiguring the Halewood and Solihull plants for EVs. Rolls-Royce has added the electric Spectre to its facility in Goodwood.

Individually, these are green shoots. But taking the UK auto industry as a whole, the indicators aren’t so positive. The rolling average of cars manufactured in the last 12 months has fallen to 761,598 – half pre-Covid levels. 

Commercial vehicle production has also dipped recently, even though the home-delivery boom typically grew output over the past four years. Stellantis recently closing its Luton van plant to consolidate production in one Wirral site will have impacted the numbers. 

This same Ellesmere Port factory used to build the Astra; Honda closed its Swindon line in 2021. Preparing for its all-electric reinvention, Jaguar has ceased making all its cars bar the F-Pace, which is strictly for overseas markets.

Exports are critical, with the UK economy barely growing and consumer demand soft (a trend repeated in many key European markets, however). In 2023, exports worth £47billion accounted for 12 per cent of total UK overseas trade. Last year, our manufacturers exported nearly eight-in-10 cars, with the EU taking 54 per cent (252,000 units) compared with 17 per cent going to the United States (79,000).

President Trump’s tariffs will hurt, especially for our small-scale premium players MINI and JLR. Rising prices will likely make cost-sensitive US consumers turn to cheaper brands and “UK producers may have to review output in the face of constrained demand,” warns Mike Hawes, CEO of the Society of Motor Manufacturers and Traders. 

“Over 25,000 jobs could be at risk as exports to America are predicted to fall, with UK employees at JLR and the Oxford MINI factory seen as among the most exposed,” warns the Institute for Public Policy Research think tank.

Aside from Nissan and Toyota, Britain’s mainstream car production has withered away because labour costs are higher, leaving the industry powered by luxury makers Bentley, McLaren, Aston Martin, Range Rover and Rolls-Royce, all backed by foreign owners. Given their brand cachet and price points, they have more scope to pass on the tariffs to US customers, but they too may face falling demand. 

At the same time, they must answer fiendishly complex questions: how much of the powertrain mix is combustion, hybrid or electric? How are staff retrained and redeployed for the electric age? Is the supply base resilient and located in the right places to minimise tariffs and shipping costs? 

The industry is pumping in billions, betting that the future is electric. The Government has pledged a £2billion Automotive Transformation Fund for capital-intensive projects.

Mike Hawes thinks the Government should go further to stimulate domestic demand for EVs: the SMMT calculates that halving VAT and eliminating the expensive car VED supplement on EVs (plus lowering public charging costs) would help put two million more on the road by 2028. 

Countries that position themselves at the heart of the electric transformation are building for the future; China is a vivid example of that. My trips to Sunderland and Crewe show the UK can compete. The race is on – and it’s a race we can’t lose.

Will the UK's car building industry grow in the future? Let us know your thoughts in the comments section...