Currently, in the UK, both car sales and new car production levels are high, but there is one potential weak link that may slow growth. Some car industry specialists are warning that a weak supply chain could slow growth.
Coatbridge, Lanarkshire -- (SBWIRE) -- 04/24/2015 -- Inward investment into the UK car-manufacturing sector is at an all time high, but the number of suppliers available to provide the parts for car manufacturers is at an all time low. Over the past 20 years, virtually every large 'tier one' supplier stopped manufacturing in the UK and moved abroad. This means that the majority of the parts that go into the new cars manufactured in the UK have to come from abroad. The supply chain for UK car manufacturers is far more complex and therefore more vulnerable than it was two decades ago, which is the last time the car industry was strong in the UK.
This makes UK car manufacturers more vulnerable. This fact creates a more volatile trading environment for them. Profitability can be hit by changes in the exchange rate and rising fuel costs.
Changes to the economy of the countries where their parts are being manufactured have a big impact as well. If wages rise in those countries,the car manufacturer has to bear much of the additional production cost burden. The more complex, volatile and elongated supply chain that UK manufacturers have to work with means it is far harder for them to keep pace with increasing demand.
There is a danger that this issue could have a knock on effect for the used car industry. The used car sector needs sales of new cars to continue to grow at a fast rate to ensure that enough second hand vehicles enter the market. Demand for used cars in South Lanarkshire and many other parts of the UK has soared from the end of 2014, and it is expected that demand in 2015 will continue to be strong, if not stronger. This is good news for used car dealers, but they need a good supply of cars to meet that increasing demand.
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