UK car production has experienced a 7.6 per cent drop in the first half of 2024 as manufacturers shift their focus towards electric vehicle (EV) production.

The Society of Motor Manufacturers and Traders (SMMT) reported that 416,074 new cars were produced, marking a decrease of 34,094 units compared to the same period in 2023.

This overall decline in production was primarily driven by a significant reduction in exports, while the domestic market saw an increase. Cars produced for the UK market rose by 17.7 per cent year-on-year to 106,157 units, whereas export production fell by 13.9 per cent to 309,917 vehicles. The European Union remains the largest export market, accounting for 55.4 per cent of the total, followed by the US, China, Turkey, and Australia.

The SMMT attributed the drop in production to the ongoing transition of manufacturers retooling their factories to accommodate EV production. Despite this shift, EV production also fell by 7.6 per cent in the first half of 2024, totalling 157,224 units. Electric vehicles now make up 37.8 per cent of total car production, a figure unchanged from the previous year.

The decline in EV production mirrors a global slowdown in demand. Notably, Tesla reported a 45 per cent drop in second-quarter profits compared to the previous year and a 4.8 per cent decrease in car sales for the same period. The company, however, remains committed to its plans for new and more affordable EV models.

The reduced demand for EVs has been partly influenced by the withdrawal of subsidies in several European countries. France reduced subsidies by 20 per cent for higher-income buyers, and Germany ended its EV subsidy programme in December to address budget constraints. In the UK, grants for buying EVs were terminated in 2022, although business buyers still benefit from some tax incentives.

Additionally, the European Union recently increased tariffs on Chinese EVs from 17.4 per cent to 37.6 per cent, plus a 10 per cent duty already in place. This move was justified by accusations of “unfair subsidisation” of Chinese EVs, making it challenging for European manufacturers to compete. However, the new Labour government in the UK has indicated it is unlikely to follow the EU’s lead. Trade Secretary Jonathan Reynolds, speaking at a G7 trade ministers meeting, stated that the UK remains “vigilant” but has not suggested similar tariffs.

The Trade Remedies Authority, responsible for addressing unfair international trade practices in the UK, has not yet launched an investigation into Chinese EV imports.