How Factory Overcapacity Threatens the Auto Industry

In the UK the prognosis is not good. Gone is the optimism of 2015 when the SMMT predicted we would break our 1972 record of 1.92m by 2018. Since then we have had Brexit, the pandemic, supply chain shortages and a fundamental shift in the approach to manufacturing. approximately by electrification.

Inovev predicts that by 2030 UK car manufacturing will still not exceed 1m. “The departure of another manufacturer from the country cannot be ruled out,” he wrote in his March report.

The most underutilized factories are usually in the countries with the highest costs, which means that their owners reduce these costs by moving more production to cheaper countries in Eastern or Southern Europe. . It’s no coincidence that usage is much, much higher there.

France, Italy, UK, Germany, Italy and Poland have the worst utilization rates, between 50 and 54%, according to Inovev, while the highest are Portugal, Hungary , Romania and Sweden (the latter an outlier boosted by Volvo demand) .

Labor cost differences are hard to ignore. Figures from the European Union’s statistics service Eurostat for hourly working rates in 2021 put France at €37.90 (£31.90) and Germany at €37.20, against €16 for Portugal, €15.30 for the Czech Republic and €11.20 for Croatia. The UK was €28.50 per hour in 2019 (latest figure available).

Governments will fight to stop the flow of production out of their countries. We saw last year the UK government’s determination to keep the port of Ellesmere near Liverpool open with a promise to pay 30% of the £100million that owner Stellantis eventually pledged to switch from the manufacture of the Vauxhall Astra to electric vans.