An automotive analyst says there is a “great deal” to be positive about the current state of the UK car industry, which could yet reach 2m units, but cautions Britain may still need access to tariff free trading conditions.
Nissan’s news last week it was to build new models at its Sunderland plant in the UK’s North East, has been widely welcomed, not least by UK Prime Minister,Theresa May, who has taken a personal interest in the Japanese automaker’s decision, but there are still post-Brexit moves as yet unknown by other manufacturers.
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There has been some speculation the UK market – one of the strongest economies to emerge after the battering administered during the last recession – could reach 2m units despite the undoubted uncertainties engendered by Britain’s decision on 23 June to quit the European Union (EU) – although many view continued tariff free trade to be essential to reach that number.
“[The] referendum result was a shock [but] any fears of immediate woe were very much misplaced,” said AutoAnalysis director, Ian Henry at this week’s UK Society of Motor Traders and Manufacturers (SMMT) Open Forum in Birmingham. “Nissan was a surprise in terms of timing and it was very much a welcome boost for the industry.
“We need continued tariff free trade. However, we do have a trade gap, particularly in components. Exports are worth GBP36bn (US$40bn), but we are importing GBP55bn of cars and parts. We have around 40%-41% UK content, but there is disparity which suggests there is opportunity for the supply chain to grow.
“The Nissan announcement made me rather more optimistic. Nissan and Jaguar Land Rover between them could make 1.25m [cars] per annum in the UK, [while] Mini, Toyota, Honda, Vauxhall could make [a further] 700,000. The fact Nissan has decided to stay is good news, but that does not necessarily mean all the other carmakers will take the same view.”
Falling exchange rates in the UK after its decision to leave the 28-strong Brussels club may encourage further supplier investment into Britain, although this year has witnessed a relative paucity of major component maker announcements.
Sterling has seen a significant weakening against major currencies such as the dollar and euro, which may prompt more research and development investment into the UK, although some feel a long-term view is the better option.
“This year has seen few Tier 1 significant investments into the UK – the two major ones were Gestamp and Magna Castings,” added the AutoAnalysis director. “UK vehicle manufacturers want to increase UK sourcing.
“Access to skilled labour is not just an issue for car companies, but also suppliers. [A] Falling exchange rate is not enough alone to encourage UK investment. Government and industry need to constantly remind themselves there will be decisions on other vehicles to be made.
“The move into electric vehicles, autonomous vehicles, we are going to need more suppliers in these areas. There is a great deal to be positive about.”
