Predicting the automotive industry in 2021

The car sector has been in the midst of a lot of uncertainty over the past 12 months due to the coronavirus pandemic and Brexit.

The automotive industry is one of the most important sectors in the UK. With its rich heritage in engineering and manufacturing, it lends itself to help drive the country’s diverse economy. 

Not only does it import and export high-quality goods around the world, but it also creates masses of jobs, with around 1 million people in the UK employed within this field.

Over the past 12 months, we’ve seen the world ravaged by the coronavirus pandemic which has taken many people’s lives, jobs, and businesses. The industry saw car sales in the UK down by 30% compared to the previous year, which understandably has had a severe impact on everyone associated with it.

Not only were we affected by COVID-19, but also the final countdown of Brexit, which for large parts of 2019 took a backseat, until the final month or two of the year when a trade deal between the UK and European Union was hanging in the balance.

Prime Minister Boris Johnson gleefully announced on Christmas Eve that a trade deal has been announced, just one week before the Brexit transition period was due to end, and called it ‘freedom in our hands’.

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Prior to the deal being announced, it was widely understood amongst the automotive sector that a no-deal Brexit could be ‘catastrophic’ for the industry, one that relies heavily on imports and exports from the EU 27.

Although a deal has been agreed upon, there is a lot of uncertainty about what it entails and how trade deals between the UK and the EU will be conducted in the future.

It had been previously expected that no deal would mean that 10% tariffs would be introduced on all imports and exports to and from the UK, but the trade deal in place now has dispelled that which comes as a huge relief for manufacturers and the country’s economy.

Despite the ‘good news’ of a deal being made, the impact of the pandemic lives on. Many factories and dealerships have been forced to close for good, which has meant job losses for thousands of people. 

It’s also led to people changing their consumer habits, with many feeling they can do everything online without having to visit a showroom.

This is something we should expect to see a lot more of this year, as customers recognise that you don't necessarily have to leave your home anymore to purchase a car, with many companies now offering to deliver to your door.

Furthermore, there has been an increasing demand for electric vehicles (EVs) which has not come at a good time with the country closing down. After the government announced there would be a ban on buying new diesel and petrol cars from 2030, we can expect to see people slowly start to transition to EVs this year and beyond.

With this shift, we could see the onus on car manufacturers to seize the opportunity to help make the UK more climate-friendly and reduce emissions. It’s thought that taking four million internal combustion engine (ICE) cars off of the road could reduce emissions by 15%.

We can expect the used car market to thrive in 2021 due to a better supply and demand balance. With many factories forced to close around the world, it has meant pricing has stabilised, making the price of second-hand cars go down and in turn, causing people to feel they get better value than buying brand new.

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All the challenges from 2020 will continue into this year, and it’s the responsibility of the industry to adapt and conform to the new environment they are being faced with. It has already done that amicably despite the restrictions and the next step will be getting more people back into work to create an even more streamlined process from the manufacturing to the eventual sale of new cars.

Overall, the industry will welcome the deal to as much extent as it can - ultimately a no-deal would have been devastating. 

But until we know the full details of the deal and what it means for the sector, there should be full caution. Much will depend on how flexible the EU is with the UK and how quickly it takes to phase everything in. 

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