Should We Care if UK Car Production Keeps Falling?

Compared to the same month in 2019, UK car production in August was down by a massive 44%, but does it really matter to consumers and should we even care if global automotive giants are not making as many cars as they used to make? The short answer is that it does matter and we should care, at least you should care if you don’t want to see the cost of buying a new car rocket to the point where it starts to become unaffordable for many.

How bad are things?
Despite some areas of the UK car market being pretty buoyant at the moment, things are pretty bad for manufacturers. August wasn't a one-off bad month by any means, and it certainly stomped on some of the more optimistic predictions of recovery after a couple of months where things appeared to be picking up.

When we were completely locked down and everything other than essential work was curtailed in April, UK car production fell by an eye-watering 99.7% compared to April 2019 with the SMMT reporting that only 197 new cars were built in the month.

Things started to look better in May, June and July as each month saw vehicle production rise and the percentage drop on the previous year reducing. The year-on-year drop in May was 95.4%, in June it was 48.2% and in July production was down by 20.8% on the same month in 2019. Then came August, and vehicle production was down on the 2019 figure by 44.6%. In July there were 85,696 new cars built in the UK, but just 51,039 cars were built in August.

What about car sales?
New car sales in September, which is one of the two biggest months for new car sales due to the new registration coming out, were only down by 4.4% from September 2019. That's not too bad, all things considered, but could we soon see a shortage of new car stock?

Lots of people are buying new and used cars for getting around instead of using public transport because they see it as a safer option, and working from home means fewer people want to pay out big money for rail season tickets they wouldn't be using half the time anymore.

The problem is a lack of available new stock is bad for buyers as manufacturers and dealers no longer have a need to offer buyers big discounts and low-rate finance to get sales. It quickly becomes a case of take-it or leave-it. If you don’t want to pay the price they'll soon find someone who will, so we all end up paying more than we'd like for new cars.

It might not be obvious yet, but I'm seeing a lot of car leasing rates at higher levels than I've seen for years. The supply shortage has already hit the motorcycle market here in the UK, with some Japanese models that I'm interested in being completely sold out and dealers have no idea when they will see any new stock.

How about used cars?
When fewer people are buying new cars the cost of buying a used car increases. Used car sales have been extremely vibrant recently, but fewer new cars being sold means less used cars coming onto the market as part-exchanges. Used car prices will therefore continue to rise, which you might think is a good thing if you're looking to change your current car as you'll get a better price for it.

Just like the housing market though, you only get the benefit of rising prices if you're downsizing or not buying another at all. You might get more for your part exchange but you'll pay more for your next car too, and you can pretty much guarantee the little extra you get for your part-ex will be dwarfed by how much extra you have to pay for your new car.

The only thing certain at the moment is that things remain totally uncertain. With the threat of ever-greater restrictions on our movements and the potential harm for the economy that could ensue, it's impossible to say where this will all end up.

If you want my advice, I wouldn't hold off buying a new or used car if you want or need one and you can afford it. You might be able to get a better deal later, but you could also end up paying considerably more or not even being able to get the car you really want. Either way, make sure you head to DesperateSeller.co.uk to get yourself the best deal you possibly can.