The number of new cars made in the UK has sunk to its lowest level for 66 years as firms warn the country is not doing enough to attract manufacturers.
The 10% drop is the worst performance since 1956, according to the Society of Motor Manufacturers and Traders.
A struggle to get parts due to Covid and a semiconductor shortage have hit the industry worldwide, but the UK has also been hit by factory closures.
Car firms warn the UK has not got a strategy to attract manufacturers.
In response, the government said it was “determined” to ensure the country remains a top global location for car manufacturing.
In total, the UK produced 775,014 cars last year, down from 1.3 million before the pandemic, with production having fallen every year since the UK voted to leave the European Union in 2016.
Manufacturers hope the car industry will start to accelerate again, but say getting to pre-pandemic levels would require major investment and new car makers to come to the UK.
They warn that the UK is lagging behind, particularly on offering state aid to manufacturers.
In the US, the government is planning to offer billions in subsidies to car makers who create electric vehicle supply chains in America.
Mike Hawes, chief executive of industry body the SMMT, warns this will “hoover up” a lot of international investment, hitting the UK industry further.
The European Union is considering retaliating by either relaxing state aid rules or by extending Covid recovery or green technology-boosting programmes.
One of the benefits of Brexit was meant to be escaping from the straitjacket of EU state aid rules which limited the amount of support governments could give to favoured industries.
Mr Hawes conceded the UK could be in the unenviable position of offering less support to crucial industries than before it left the EU.
Speaking to the BBC’s Today programme, he said the UK needed “something that demonstrates that the UK is open for business and open for these investments”.
The production figures were also affected by the closure of Honda’s factory in Swindon in July 2021 and the fact that Vauxhall Astras have not been made at Ellesmere Port since April 2022.
Mr Hawes said the numbers reflected how “tough” 2022 was for UK car manufacturing, although the country had still made more electric vehicles than ever before, with almost a third now fully-electric or hybrid.
He warned the global car industry had already begun investing in electric vehicles and batteries and the UK only had “a few years” to act.
“We need to be on the front foot making sure we have a range of measures that attract investment,” Mr Hawes said.
He called for a strategy to accelerate battery production and the shift to electric vehicles, adding that the UK was well placed to succeed given its skilled workforce and engineering expertise.
UK car production was further set back by the collapse of battery start-up Britishvolt last week.
The firm had planned to build a giant factory to make electric car batteries in Cambois, near Blyth in Northumberland, but the project ran out of money.
The UK currently only has one Chinese-owned battery plant next to the Nissan factory in Sunderland, while 35 plants are planned or already under construction in the EU.
A government spokesperson said: “We are determined to ensure the UK remains one of the best locations in the world for automotive manufacturing.
“Our success is evidenced by the £1bn investment in Sunderland in 2021, and we are building on this through a major investment programme to electrify our supply chain and create jobs.”
