FTSE 350 Review: Auto industry shifts through the gears

Supply chain strains worsened in the first six months, with semiconductor availability remaining tight and the war in Ukraine forcing carmakers to find alternatives to factories that provided wiring harnesses and other parts.

By the end of the year, shortages had eased and production had stepped up. New car registrations in the final quarter increased by 30 per cent year on year in Germany and 23 per cent in the UK, according to RBC Capital Markets – but they remain well below pre-pandemic levels. Although chip supply will remain “erratic” this year, the Society of Motor Manufacturers and Traders is forecasting a 12 per cent increase in new car registrations to around 1.8mn in the UK. Worldwide, car sales are set to grow by 5.6 per cent this year to 83.6mn units, according to S&P Global Mobility.

An increase in volumes would be welcomed by companies in the supply chain such as TI Fluid Systems (TIFS) and Dowlais – the soon-to-be spun-out automotive arm of Melrose Industries.

The luxury carmakers’ prospects have continued to improve and their shares have garnered investor interest. Ferrari’s (IT:RACE) shares are up 3 per cent, against a 14 per cent overall decline in the EuroStoxx Automobiles and Parts Index over the past 12 months.

Volkswagen’s (DE:VOW3) spin-out of Porsche (DE:P911) via an IPO was also a success – the €82.50 (£72) per share offer was oversubscribed and the shares have continued to make gains since, trading at over €103 at the time of writing.

In the FTSE 350, the perennially-lossmaking Aston Martin Lagonda (AML) attracted external investment through its latest rights issue, although trading continues to disappoint. Its pre-tax loss for the nine months to September widened to £511mn, from £189mn a year earlier, despite a 16 per cent increase in revenue.