Lack of chips to further hit UK car market in 2022 – industry group

The global semiconductor chip shortage will continue to hurt British car sales throughout this year and into 2023 after making a serious dent in vehicle supply in 2021, an industry group said on Thursday.

The Society of Motor Manufacturers and Traders (SMMT) said around one in six new cars sold in Britain in 2021 was either battery electric (BEV) or a plug-in hybrid (PHEV) and overall new car registrations inched up around 1 percentage point to 1.65 million units versus 1.63 million in 2020.

“Not a great year, coming on the back of an equally poor year,” SMMT chief executive Mike Hawes said, referring to the impact of the chip shortage on sales which crimped a post-pandemic recovery.

The shortage of chips, used in everything from brake sensors to power steering to entertainment systems, has led automakers around the world to cut or suspend production, pushing up both new and used vehicle prices amid robust demand from consumers.

Hawes said the average vehicle requires between 1,500 and 3,000 semiconductor chips.

“We think demand is still there and demand is still strong,” Hawes said. He added that the general view was that the chip shortage would undermine the market over the course of 2022 and this would “flow through to 2023”.

Prior to the most recent coronavirus surge, the SMMT had forecast UK car sales of 1.96 million units in 2022, below the normal run rate of around 2.3 million units.

The SMMT said fully-electric BEVs accounted for 11.6% of sales in 2021 – more than the cumulative sales for 2016 to 2020. In December, BEVs made up roughly a quarter of UK car sales.

PHEVs, which have both a battery and a combustion engine, accounted for 8.9% of sales in 2021.

The UK government plans an effective ban on pure fossil-fuel models by 2030. But the SMMT said that more needs to be done to lower electric vehicle prices and to improve charging infrastructure, especially for on-street charging.

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Car costs and charging concerns are the “biggest barriers to people considering this type of purchase,” Hawes said. “We’re not where we need to be.”