Semiconductor chip shortage

British car industry output declined for the second month in a row in August as the months-long shortage of computer chips hampered the sector’s recovery effort.

The number of cars built in UK factories fell by 27% year-on-year to 37,200 in August, according to lobby group the Society of Motor Manufacturers and Traders (SMMT). That was down from 51,000 in the same month in 2020, when carmakers were racing to make up for time lost to lockdowns.

Demand in the UK and beyond recovered rapidly as economies open up again, but carmakers around the world have struggled to raise their output because of the disruption caused by the pandemic – most notably the global shortage of computer chips used in everything from entertainment systems to controlling windscreen wipers and electric car batteries.

The SMMT expects the chip crisis to wipe 100,000 off the UK’s total car production for 2021. That would represent a huge blow for an industry that made fewer than a million cars in the past 12 months – down from 1.7m as recently as 2017.

So far, production in 2021 is only 14% higher than 2020, when factories were closed for months. Output is down by 32% compared with the same period in 2019.

One bright spot was the continued increase in the share of cars with batteries – both pure electric cars such as the electric Mini made in Oxford or the Nissan Leaf made in Sunderland, and hybrids that also contain an internal combustion engine. More than a quarter of all new cars made in the UK during August were electrified, a record high.