June UK auto output grows, exports fall

Britain’s automotive industry grew for the sixth straight month in June, but the pace of growth slowed as companies faced ongoing material shortages and supply chain disruption, according to the latest Lloyds Bank UK Sector Tracker.

The sector – which includes auto parts manufacturers – recorded 52.8 on the Tracker’s output index in June (compared to 54.5 in May). A value above 50 on the Tracker indicates expansion, while a value below 50 indicates contraction.

In addition to growing production, the sector countered a broader trend of declining demand and registered an eighth consecutive month of new order growth (62.3), which accelerated strongly from May (55.8).

While this indicated resilient domestic demand against the backdrop of a slowing UK economy, the Tracker suggested a divergence in foreign demand for UK car products.

In June, the sector posted 46.7 on Tracker’s measure of new export orders – the third straight month of contraction and a bleak signal for future workloads given the importance of foreign demand to automakers.

Margin pressure increases, companies stock parts

Both automakers’ input costs (81.3) and prices charged to customers (69.9) remained above 50 in June, but both increased at a slower pace than in May (vs. 88.0 for input cost inflation in May, and 78.8 for inflation in prices charged to customers).

However, pressure on industry margins, the difference between the rate of inflation for input costs and the prices charged to customers, continued to increase for the second month in a row (11.4 in June versus 9.3 in May and 5. 0 in April) to its highest point since January.

Automakers also faced supply chain challenges in June with companies experiencing difficulties acquiring electrical items and semiconductors, with reports of shortages 7.5 times and 5.6 times higher than their respective long-term averages.

Meanwhile, the Tracker’s measure of supplier delays posted its second-largest month-over-month loss of momentum in more than 20 years of underlying data (21 in June versus 38.3 in May), indicating longer wait times for components and materials.

Together, these supply chain headwinds helped automakers increase their raw material inventories in June at both the fastest pace and the fastest month-on-month acceleration ever (78.4 in June versus 54.5 in May).

Stuart Apperley, relationship director, industry & transportation at Lloyds Bank Corporate and Institutional Banking, said: “Continuing challenges in component supply, increasing economic uncertainty, rising energy and operating costs and disruptions caused by the war in Ukraine have made 2022 a challenging year. made for the British car industry.

“On the positive side, the UK continues to see rapid growth in the construction of battery electric vehicles, which now account for 16% of all vehicles sold in the UK to date.

“The sector has shown its resilience over the past two years, but will need continued investment and proactive support to ensure the UK remains a competitive landscape as it moves from internal combustion engines to EV and other zero-emission technologies.”

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