Each car contains around 1,500 semiconductors © Getty Images
Each car contains around 1,500 semiconductors © Getty Images

Chip shortage and 'pingdemic' see car output hit 70-year low

29 July 2021

The UK car industry is warning supply chain disruptions will continue to impact production until 2022.

The Society of Motor Manufacturers and Traders (SMMT) said car production in June reached its lowest levels since June 1953 with just 69,097 cars produced, with the exception of last year. 

SMMT said production for the first half of 2021 was 38.4% lower than the five year average, with UK factories producing 498,923 cars, representing a loss of more than £8.5bn.

“The current situation for UK manufacturers remains difficult with the supply uncertainty expected to last into 2022,” said SMMT.

It said the chip shortage was predicted to cut production volumes by 100,000 units and it called for urgent action to address staff shortages caused by the “pingdemic”.

Semiconductors are vital for car manufacturing, with each car containing approximately 1,500 chips that form the basis of circuit boards. 

Jaguar Land Rover said shortages had significantly impacted profits, slashing production by 30,000 vehicles, while Tesla said it had reprogrammed alternative chips to keep production lines running. 

Mike Hawes, SMMT chief executive, said operating conditions were “challenging”.

He said: “The industry still faces headwinds most notably from global semiconductor shortages and staff absenteeism as a result of staff being pinged.

“Businesses have ensured their facilities are Covid secure but urgent action is needed, such as bringing forward the 16 August target date for exempting fully vaccinated adults from self-isolation and introducing a 'test to release' scheme to support those employees not yet fully vaccinated.”

Hawes’ comments come after it was revealed only 200 of the promised 2,000 government workplace testing sites announced to address the “pingdemic” are up and running. 

The government said the sites would be built to help workforces deal with staff shortages after a record 689,313 people in England and Wales were told to self isolate by the NHS Test and Trace app in the week to 12 July.

The government said many of the sites will not be up running until the end of  August – two weeks after the date when self-isolation requirements will be lifted for those fully vaccinated. 

Currently 70% of the adult population in the UK have been fully vaccinated, and only unvaccinated workers will need to use the sites.

Staff shortages, global supply chain issues, commodity prices, and a shortage of HGV drivers are seeing many companies raise prices. 

Nestlé became the latest to announce increases, following in the footsteps of Reckitt Benckiser, Unilever and Procter & Gamble, when it said prices would rise by about 2% to offset 4% cost inflation, after already raising prices by 1.3% this year.

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