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Is the UK car industry a good investment?

06/04/2023

In January 2023, it was announced that UK car production had fallen to its lowest numbers since 1956 as a result of factory closures, semiconductor shortages and COVID-19. In order to return to pre-pandemic production levels, say manufacturers, the industry needs serious investment. 

With this in mind, is it the right time for private investors to invest their money into the UK automotive sector? 

 

Significant challenges

After the challenges of COVID-19, it was hoped that 2022 would see a turnaround for the UK automotive industry. However, the semiconductor shortage has created even further problems, with Ernst & Young stating that one UK car manufacturer was facing backlogs of 200,000 vehicles as a result. 

E&Y state that two things are needed to improve the prospects of the sector: greater stability, and more government support – especially if the country is to take advantage of the ever-growing interest in electric vehicles. SMMT data shows that UK car manufacturing is showing signs of growth – and that other countries are facing similar challenges and have had similar drops in output. At the macro level, they say, the UK “is in fact faring better than most”. 

 

What about electric vehicles?

It’s electric vehicles that are powering growth in the UK automotive industry. As of the end of February 2023, there were over 690,000 battery-powered vehicles registered in the UK, with over 265,000 registered in 2022 alone – 40% more than in 2021. 

There was significant investment in UK electric vehicle production in 2022, totalling around £4.5bn.  However, greater investment into UK-based battery factories is required to avoid export tariffs associated with EU rules of origin coming into force in 2024. With battery manufacturer Britishvolt collapsing this January, can other battery manufacturers step up to the job? 

The future currently looks rocky for the UK automotive industry. Could electric vehicles save the day? 

 

“Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.”

 

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