The Ongoing Supply Chain Shortage
The automotive industry is currently facing a major supply chain shortage, that is set to continue throughout 2023 and into 2024. This shortage is being caused by a combination of different factors, including increased demand for vehicles, disruptions in global trade, and supply chain bottlenecks.
One of the main causes of the supply chain shortage is the high and unexpected demand for new vehicles. With the economy still recovering from the COVID-19 pandemic and lockdowns, more and more people are looking to buy new cars. This increase in demand is putting a strain on the supply chain, as manufacturers struggle to keep up with the number of orders.
Another major factor contributing to the supply chain shortage is disruptions in global trade. The pandemic has caused major disruptions in trade routes and shipping lanes, making it difficult for manufacturers to get the parts and materials they need to build the cars. Additionally, Russia’s invasion of Ukraine has caused some difficulties with trade barriers, making it difficult for manufacturers to import the parts and materials that they need.
Supply chain bottlenecks are also contributing to the automotive supply chain shortage. These bottlenecks include everything from shortages of raw materials to problems with logistics and transportation.
Overall, the automotive supply chain shortage is a major issue that is affecting the entire industry. Manufacturers are struggling to keep up with demand, and many are having to delay production or cut back on their output. This is leading to higher prices for consumers and a shortage of vehicles on the market.
The UK Economy & Threat of Recession
The UK started the new year on the brink of a recession, the cost of living crisis was in full swing and inflation was at the highest rate since the early 1980s. How the current state of the economy will affect the automotive industry throughout the rest of 2023 is hard to predict. The British Chambers of Commerce (BCC) forecasted that the UK’s economy is not likely to return to its pre-pandemic size until the final quarter of 2024.
The automotive industry is a major contributor to the UK economy and any changes in the economy could have a significant impact on the industry. There are a number of ways that the automotive industry could be affected in 2023:
If the UK economy is doing well, consumers may be more likely to buy new cars, which would lead to an increase in sales for car manufacturers. However, if the economy is not doing well, consumers will be less likely to buy new cars leading to a decrease in sales.
Another way that the economy could affect the automotive industry in 2023 is through changes in exchange rates. If the value of the pound falls compared to other currencies, it will be more expensive for UK car manufacturers to import the parts and materials they need. Increasing costs for manufacturers leads to higher prices for consumers. If the value of the pound rises compared to other currencies the opposite would happen, it would be cheaper for UK car manufacturers to import the parts and materials they need, decreasing the costs for manufacturers, and leading to lower prices for consumers.
Additionally, any changes in government policies and regulations could affect the automotive industry. If the government introduces policies that are favourable, such as tax breaks or grants, it could lead to an increase in investment and growth in the sector. However, if the government introduces policies that are not favourable to the industry, such as taxes or regulations, it could lead to a decrease in investment and a decrease in growth in the sector.
Overall, it’s extremely hard to predict, all of these factors could go one way or the other. The Bank of England expects the recession to last for at least the whole of 2023 and the first half of 2024, before a gradual recovery after that. So we are still a long way from a stable UK economy, making it extremely hard for industries such as the automotive one to predict what will happen.
