News Analysis: UK auto output plunges amid erratic U.S. trade policy, investment doubts

The Star

06-07-2025

by Zhao Jiasong, Hang Rui, Larry Neild
LONDON, July 6 (Xinhua) -- Britain's auto industry is facing its worst downturn in decades, with May vehicle production plunging 32.8 percent year-on-year to 49,810 units, the lowest for the month since 1949, excluding 2020 pandemic disruption.
According to the Society of Motor Manufacturers and Traders (SMMT), this was also the fifth consecutive monthly decline.
Experts attribute much of the decline to U.S. President Donald Trump's import tariffs, which have severely disrupted supply chains and undermined global competitiveness.
David Bailey, professor of business economics at the University of Birmingham, described the situation as a "storm" that has thrown the UK auto sector into a "low-volume crisis." He emphasized that the industry is now operating well below capacity, with rising costs and diminished competitiveness.
Jim Saker of Loughborough University echoed this concern, saying, "Trump's tariffs have disrupted the supply chain," leading to uncertainty over where manufacturers should commit future investments.
David Bailey, a professor of business economics with the University of Birmingham, described it as a "storm" that has pushed the UK auto industry into what he calls a "low-volume crisis."
He stressed that the sector is now operating well below capacity, with costs rising and competitiveness suffering as a result.
Jim Saker, an auto industry expert of Loughborough University, echoed this view, emphasizing that "Trump's tariffs have disrupted the supply chain" and left car manufacturers unsure about where to commit future investment.
The export shock has been particularly severe in the UK's two biggest markets: the United States and the European Union. SMMT data shows that car exports to the United States plunged by 55.4 percent, while shipments to the EU dropped by 22.5 percent.
Some manufacturers have responded by halting exports entirely. Jaguar Land Rover (JLR), which usually exported nearly a quarter of its production to the United States, suspended shipments in April after Washington imposed a 25 percent import tariff on foreign-made cars. Similarly, Lotus has reportedly considered relocating production to the U.S. to offset rising costs and market instability.
A newly negotiated UK-U.S. trade agreement has somewhat eased tensions. It lowers tariffs on UK car exports to 10 percent, capped at 100,000 vehicles per year.
While industry figures welcomed the deal, many see it as insufficient. "It avoided the worst-case scenario of a 25 percent tariff," said Bailey, "but 10 percent is still worse than before, and JLR alone could exceed the 100,000-vehicle cap."
He also warned that indirect supply chain damage and job losses continue, despite the tariff reprieve.
In response to the crisis, the UK government has launched a 10-year Industrial Strategy aimed at addressing deep-rooted structural problems. Key among its goals is to reduce high energy costs, which are frequently cited as a barrier to competitiveness.
While the policy has been welcomed in principle, experts doubt its effectiveness and timeliness. "There are question marks about how far it goes," Bailey said, "especially when it comes to enabling the transition to electric vehicle production."
He highlighted that the electricity prices in the UK that are significantly higher than in the EU and erratic U.S. trade policy continue to cast a shadow over implementation.
Both Bailey and Saker warn that the UK auto industry is in a deep capacity crisis. Production is far below normal, and there are few signs of fresh investment.
Saker cautioned that, without bold government action, the UK risks becoming "a retail automotive sector with some engineering elements", rather than a true manufacturing hub.
He added, "I haven't seen anybody being attracted into the UK to basically start manufacturing."
Looking forward, foreign investment, especially from China, could help revive the sector. Bailey noted. "I think that should be key for the government in terms of trying to attract in a Chinese producer," he added.
However, he warned that "high energy costs in the UK make that very difficult." Unless addressed, "I can't see the UK being an attractive place for investment as against Central and Eastern Europe," he noted.