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Automotive

Introduction

Europe’s most diverse and dynamic automotive industry

The automotive industry is a pivotal part of the UK manufacturing sector. Automotive firms are leaders in global best practice in many areas of manufacturing and provide a key source of improvement for the UK manufacturing sector as a whole.

Automotive businesses are leaders in many areas of manufacturing, purchasing, product development and logistics. Major inward investors have brought with them world best practice and the skills and knowledge of the industry provide a key source for improvement across the UK manufacturing sector as a whole.
The sector has two distinct parts: the manufacture of vehicles and components; and the motor trade (including retail, distribution and aftermarket services).

In the case of manufacturing, Britain leads Europe as the most diverse and productive vehicle manufacturing location and as a global centre of excellence for engine development and production.

More than 40 companies manufacture vehicles in the UK – ranging from global volume car makers, van, truck and bus builders, to specialist niche players. The industry is supported by a dynamic supply chain including many of the world’s major component manufacturers, technology providers, design and engineering consultancies; and it benefits from a world-renowned knowledge base.

No other European country has anything like this range and number of automotive players. The industry in the UK is characterised by significant foreign direct investment and high exports, equivalent to 11% of the UK’s exports of goods. Overall, automotive manufacturing provides 194,000 jobs and contributes some £9.5 billion value-added to the UK economy (6.2% of the total for the whole UK manufacturing sector). The companies based in the UK operate in Europe’s third biggest automotive market with UK customers in 2007 accounting for the purchase of more than 2.4 million new cars – equivalent to 17% of European vehicle registrations.

Moreover, the UK offers a highly sophisticated retail and service/ maintenance sector, which last year generated some £22 billion value added to the UK economy. It comprises some 66,500 businesses employing 552,000 people.

Setting standards

The automotive industry is at the forefront of process improvement – setting standards for other sectors, such as aerospace – and is characterised by economies of scale and low unit costs, despite the increasing complexity of its products. In 2007, 1.5 million cars and just over 216,000 commercial vehicles were produced in the UK. Of these, more than 77% of the cars and 61% of the commercial vehicles were exported.

The UK accounts for some 2.4% of worldwide vehicle output and 8.7% of European assembly, ranking it fourth in Europe and twelfth globally.

There are around 2,600 component manufacturers in the UK, ranging from the global players to small and medium-sized businesses. Together they contribute over £4.5 billion added value and employ around 115,000 people. The components sector exports over £5 billion worth of goods annually, 75% destined for Europe. The UK is also an increasing force in powertrain design and production (the components making up the power transmission system of a motor vehicle from engine to final drive), with a particular strength in engines.

There is a long-established, independent, design engineering sector offering the full spectrum of services from concept design through to limited-series vehicle production. The sector is recognised internationally for its flexibility and responsiveness and for the innovative qualities of its engineers. It continues to evolve and the last five years have witnessed a succession of acquisitions, closures and re-emergences in response to the changing demands of its global market.

The UK is also strongly influential in vehicle styling, with many British designers and graduates from British institutions directly employed by vehicle manufacturers around the globe. As a direct result of this expertise, Nissan recently moved its design studio from Germany to London.

Heritage and change

This strong combination of heritage, diversity and agility places the automotive industry in the UK in excellent shape to face the unremitting pressures for change in the 21st Century. The principal challenge is for the UK’s automotive manufacturing industry to align its technology, product and business performance to deliver customer value in a global industry subject to relentless cost-cutting pressures.

Regulation poses further challenges. Environmental protection and safety legislation are set to strongly influence the number and type of vehicles that will be manufactured, marketed and used. The focus within Europe will be on securing these environmental benefits while generating competitive advantage.

Additionally, industry analysts expect South East Asian manufacturers to dramatically increase their global market share. But with the UK’s close focus on efficiency, productivity, innovation and value-added manufacturing and its cross-section of international manufacturers, the industry is well placed to face these challenges with confidence.

A GLOBAL FORCE

The UK automotive manufacturing industry is truly dynamic, accounting for 0.8% of GDP. The world’s major automotive companies are attracted to the UK by an unrivalled combination of engineering excellence, a skilled and flexible workforce and a government that strives to create an excellent business environment for companies to prosper – whether domestic or with foreign parents.

One of the great strengths of the UK automotive industry is a deep understanding of globalisation and an ability to continuously evolve and create new opportunities in the face of change. Over the last 20 years there has been a revolution in the way vehicles are manufactured, with a streamlining of production processes, elimination of waste and focus on quality, cost and delivery. It can be said that the automotive industry in the UK now rivals that in any country in the world for its combined efficiency, quality and unit cost.

Foreign direct investment

Overall, the sector includes some 3,300 firms. The majority of vehicle manufacturers and first-tier component suppliers are overseas owned, all treated equally by the Government. Seven of these are volume car manufacturers with a number of truck, van and bus companies, supported by 19 of the world’s top 20 suppliers. The list includes, for example, BMW (MINI), Ford light commercial vehicles and engines, GM (Vauxhall), Honda, Jaguar and Land Rover, Nissan and Toyota. Suppliers include Aisin, Bosch, Calsonic, Dana, Delphi, Denso, GKN, Johnson Matthey, Pilkington, Siemens VDO, TRW,Visteon and many more.

In addition, there are a number of manufacturers producing high value and luxury vehicles serving niche markets, including Aston Martin, BMW (Rolls-Royce), Caterham, Connaught, Gibbs, McLaren and Mercedes-Benz (Mercedes-McLaren SLR), Morgan, Proton (Lotus), TVR, and VW (Bentley).

There are also major companies from the construction equipment, heavy plant and off-road sectors such as Caterpillar, CNH, JCB, Komatsu and Terex, all manufacturing in the UK.

The UK has three sites producing light and medium vans. IBC Vehicles in Luton builds Vauxhall/Opel, Renault and Nissan badged vehicles, the Ford plant in Southampton manufactures Transit vans and LDV in Birmingham produces the Maxus van range.

The UK’s sole volume truck builder is Leyland Trucks, a wholly owned subsidiary of the PACCAR group of the US. The Leyland facility is one of Europe’s largest and most advanced plants and has won many industry awards for its efficient performance. It builds trucks under the DAF brand. From 2008 all DAF trucks on UK roads will have been built at Leyland.

Overall the industry is currently investing over £1 billion annually in new plant and technology, equivalent to 13% of gross value-added.

The UK is also a centre for design engineering where around 7,500 people are employed, generating a turnover of some £650 million, with around 65% exported. The UK is home to the dedicated facilities of vehicle manufacturers, such as those at Ford’s engineering centres at Dunton, Gaydon and Whitley, and Nissan’s R&D centre at Cranfield. In addition renowned names such as Lotus Engineering, MAHLE, MEL, Millbrook, MIRA, mi Technology, Perkins, Pi Technology, Prodrive, Ricardo, RLE, Roush, TRW Conekt, TWI and Zytek are also active in the UK. Many of these have other overseas operations, located everywhere from mainland Europe to the US, Japan and China.