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Published: Sun, July 30, 2017
Economy | By Melissa Porter

Auto industry ditches its 2m target

Auto industry ditches its 2m target

The target has been abandoned after a near-14 per cent plunge in production at British auto factories last month, with the SMMT, the industry's trade body, stating that it did not expect a pick-up in output during the present Brexit uncertainty. Independent outlook forecasts sector will just miss 2 million production milestone by 2020.

Despite uncertainty in the industry, production is forecast to rally for the rest of the year as new and updated models are launched.

It marks the third consecutive month of decline and a 2.9 per cent drop in year-to-date production figures. Last year, production rose to 1.7m cars as United Kingdom plants hit their highest output levels in twelve years.

Production for export continued to drive volumes in 2017 as global demand for British-built cars dipped by a marginal -0.9% in the first six months, with 683,826 cars shipped overseas.

However, it is feared that market softness in the United Kingdom and key export markets could see this forecast revised.

In the first six months, global demand grew in a number of markets, notably the U.S. - the UK's biggest export region after the European Union - where exports rose by more than a third 37.6 percent, moving up from eighth place in 2016.

The vast majority of the recent decline in output this year appears to be driven by falling demand within the UK. However, he added that the prospect of increasing sales of British-made luxury cars, for which there was great demand in India, remained limited with high tariff regimes still in place and expressed reservations about the potential for changing this.

The number of cars built for export, which accounted for more than three-quarters of the June output, fell 13.1% to 107,270 units, while those built for the domestic market were down 15.9% to 29,631.

"Brexit uncertainty is not helping investment and growth is stalling.", said Mike Hawes, SMMT chief executive.

"Investors need certainty so, at the very least, the United Kingdom must seek an interim deal which maintains single market and customs union membership until we have in place the complex new agreement sought with the EU", Hawes, said. "We need to maintain the barrier free trade that we now enjoy", he said, adding that reverting to WTO termswould be disruptive to the supply chain.

"Though BMW's decision to manufacture the new electric Mini in the United Kingdom is also undoubtedly good news, other investment decisions are being delayed as a result of the uncertainty caused by Brexit".

Brexit uncertainty and a failure to secure a deal could cause output to fall in 2019.

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