What’s fuelling the Automotive sector in 2021 and beyond?

The automotive industry has been one of the hardest hit during the peaks of the pandemic and has faced many testing times in the last 18 months. Below we take a look at some of the contributing factors and what lies ahead for the sector.

Production

Car production came to an abrupt stop in the UK and Europe when the first lockdown came into place in March 2020. Tight restrictions announced virtually overnight meant that factories had to ensure their premises met COVID-19 guidelines and safety measurements before being allowed to re-open.

By the arrival of the second lockdown in November 2020, employees were allowed to work from home and production was allowed to go ahead. This continued throughout lockdown three from January this year, although there were serious declines in sales. This was no doubt due to the Government’s order for the public to stay at home in parallel with the rise of remote working resulting in less need for travel as well as furloughed workers and redundancies.

Sales

After a three month closure, car showrooms and dealerships in England were allowed to reopen again on 12 April this year. This had a positive impact on sales with vehicles being able to be sold in showrooms rather than via click and collect services.

At the start of this period, the Society of Motor Manufacturers and Trader (SMMT) predicted that there would be a surge in demand. They estimated that for the industry to compensate for a four month sales loss by the end of 2021, there would need to be a new car sold every 12 seconds.

On 12 April 2021 Chief Executive of SMMT Mike Hawes said:

“After one of the hardest years in living memory for everyone, reopening showrooms today takes the handbrake off UK Auto.

With the widest and greenest choice of cars ever seen, unleashing pent up consumer demand can accelerate the industry’s recovery and that of the economy. As the automotive sector counts the cost of £22.2 billion lost in turnover during the pandemic, we hope today marks the start of that recovery, as well as giving consumers ever more choice for their motoring needs.”

Rather disappointingly, recent statistics from SMMT reveal new car sales in September 2021 were down 34% compared to September 2020. The fall in sales is largely being attributed to the ongoing shortage in semiconductor chips which has increased waiting times for new models and forced some manufacturers to cut down their line-ups.

However perhaps future opportunities for the automotive sector could be on a global scale. A new report from SMMT revealed that UK vehicle exports were worth £30 billion in 2020 (representing 10.9% of all manufactured good exports). The industry body is now calling for the Government to put the sector at the forefront of future post trade negotiations.

The fuel crisis

The big story dominating the headlines in recent weeks has been the fuel shortage across the UK. It seems there were several contributing factors, with the primary reason being a shortage of lorry drivers to restock the pumps coupled with fluctuations in the demand for fuel and panic buying brought on by media hype.

Another big issue this event brought to light was whether now was the time to make the switch to purchasing an Electric Vehicle (EV). The National Franchised Dealers Association said multiple dealers reported a spike in EV enquiries since the start of the fuel crisis.

The SMMT also reported “bumper growth” in the sale of plug-in cars back in July, with battery electric vehicles comprising 9% of sales. Plug-in hybrids accounted for 8% of sales and hybrid electric vehicles nearly 12%. Also in July, more electric vehicles were registered than diesel for the second consecutive month. The UK has pledged to ban the sale of new petrol and diesel cars by 2030 and of new hybrids by 2035.

What’s next for the sector?

There is no doubt that the automotive industry has had it’s fair share of disruption, challenges and obstacles to contend with. A shift in consumer demands and behaviours has come at a time when manufacturing and sales trends have been hard to predict on many level

However, it’s also an exciting time. Further advancements in technology fuelled by sustainability and mobility trends will reflect changing consumer behaviours and times. In addition, the demand for vehicles internationally could provide a real opportunity for the UK automotive sector.

For further advice please get in touch with a member of our Motor Retail team.