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The automotive industry is an integral part of the UK economy and vital in helping to deliver the government’s net zero carbon strategy. It has been affected on both the supply and demand sides in recent years, however, and continues to face serious challenges ahead.
A rise in demand for electric vehicles requires investment in various business areas, including updating production infrastructure, dealing with new vehicle components, and retraining the workforce.
Financial solutions for the automotive industry need to be flexible and tailored to address these specific issues so that funding is there to support changing demands and deal with old problems that are not yet fully resolved.
Automotive businesses have faced unprecedented challenges in recent years, particularly since the start of the global pandemic in 2020. Although demand has increased once again, other factors are creating a difficult set of trading circumstances.
Soaring energy costs
The costs of production have increased sharply due to the energy crisis following Russia’s invasion of Ukraine, leading to higher price points for UK car buyers. As a result, there is a risk that manufacturers could move car production to countries that use shale gas, such as the United States.
Global shortage of semiconductors
Semiconductor shortages, originally caused by high demand for laptops and tablets during the pandemic, led to a sharp decrease in vehicle production. Semiconductors are used to provide a variety of vehicle features that we often now take for granted.
Heated seats, digital displays, and driver-assist systems are just a few areas where the lack of availability of semiconductors delayed assembly line production and severely disrupted new car order book fulfilment.
Supply chain disruption
Global supply chain disruptions continue to affect the automotive industry in the UK. Uncertainty around the availability of supplies coupled with global shipping issues creates a difficult operating environment for automotive businesses.
A common denominator in managing and overcoming some of these issues is flexible and easily accessible automotive finance products that support cash flow and preserve business capital.
With innovation taking place so rapidly in the automotive industry businesses need access to financial products that are closely tailored to their needs. Funding solutions that support investment in new infrastructure, for example, and finance that helps with working capital availability.
Supply chain finance
Supply chain finance extends the payment deadline for large automotive companies and improves cash flow whilst their suppliers enjoy immediate invoice payments made by the lender. This improves the resilience of what are typically complex supply chains and benefits all parties.
Working capital finance
Working capital finance supports growth projects and helps to smooth cash flow. It is a form of short-term lending that can fund additional labour or energy costs incurred during a new development programme, for instance. Examples of working capital finance include invoice finance, revolving credit, and secured or unsecured loans.
Asset finance enables investment in expensive hard assets without the significant capital outlay. Repayments are made over several years with various products available, including hire purchase agreements, finance leases, and asset refinancing.
Being well-established commercial finance brokers, UK Business Finance knows the criteria of all the lenders in the UK. We search the whole of the market to find the most suitable finance solution for your automotive business.
Please get in touch with our expert team for more information on how we can help.
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