The future prospects for the UK car industry are not good. Only the luxury brands provide bright spots. (Image: Adobe Stock: elenvd, janaluchenko / Nissan)
It was something like a call for help from the intensive care unit: almost begging, the British automotive industry asked the EU at the end of July for a postponement of the Brexit tariffs on electric cars, which are to apply from 2024. With good reason: Because the increasing demands on the local share of value creation within Great Britain or the EU will hardly be able to be met, these barriers could even deal the deathblow to English patients in front of the most important export market for the few remaining plants on the island, experts fear . It is not for nothing that former Nissan and Aston Martin boss Andy Palmer is already warning of the loss of 800,000 jobs.
Why is the British auto industry in crisis?
“What a descent”marvels Arthur Kipferler from strategy consultant Berylls: “England used to be something like the Japanese aircraft carrier off Europe’s coast and a real threat to automakers on the continent”says the expert, referring to the factories of Honda in Swindon or Nissan in Sunderland. “But with Brexit, a decline has begun that can hardly be stopped.”, he sums up the mood. And the numbers prove him right: while the British were still building 1.7 million cars in 2016, the year of the referendum, in 2022 it was only 775,000 and thus ten percent less than the year before.
He sees the reason for this not only in the more difficult logistics with longer terms and higher costs, in endless bureaucracy and new hurdles in what used to be borderless trade. But the main culprit is the constantly self-reinforcing downward spiral: “In this problematic environment, manufacturers are finding it very difficult to make production decisions and the long-term investments required for them”, he says. And every decision for a plant in another country, even every publicly expressed doubt, such as that recently expressed by Stellantis boss Carlos Tavares, shakes the confidence of the suppliers, who need it in the vicinity of the plants for a stable automotive industry. “Because with the few remaining factories in the country and the shrinking production, it is difficult to feed the suppliers or to persuade them to invest in new plants and locations.”
But the threatening risk is the Rules of Origin clause in the EU-UK trade and cooperation agreement, says Philip Dunne, a partner at Roland Berger in London. It states that from January 2024 at least 45 per cent of the parts of an electric vehicle assembled in the UK must also come from there, otherwise exports to the EU will be subject to a 10 per cent tariff. That could get expensive. Because currently 80 percent of British production is exported – and more than half of it to the EU. “A 10 percent tariff would make assembly in the UK unprofitable”says Dunne and believes that many international manufacturers would then move away or not come to England at all.
The problem here is the batteries, which account for 40 to 60 percent of the vehicle’s value. And there are currently no production facilities or even gigafactories for them in the UK, nor a realistic plan for their construction. Some manufacturers are now trying to do this on their own, reports Dunne. “But none of these projects will create an industrialized supply source for batteries before 2024.” However, the EU is also behind schedule with its plans, so that the renegotiation of the current agreement is in the interest of all parties, he spreads optimism.
Does Britain’s auto industry stand a chance?
Not least because of this, Dunne does not dismiss the English patient and hopefully quotes current statistics: “In the case of commercial vehicles, production is at its highest level in ten years.” And car production is also increasing again, although it is still well below the level before the pandemic. “Overall, the prospects for most brands are good. The FTSE 100 suppliers are also in a strong position, as are the large dealer groups.”
Berylls expert Kipferler also sees a few location advantages: the language and the legal system, for example, are much closer to the Americans in England than in continental Europe. “And of course an expat would rather go to London than to Ljubljana.”
Whether Stellantis will carry out its threat and withdraw Opel production from England, how the electric Mini from China will affect the plant in Oxford, how long Ford will remain loyal to the British and how Nissan will continue in Sunderland – nobody dares the experts a prognosis. But at least two niches you don’t have to worry about. Brands like Rolls-Royce, Bentley or Aston Martin are hard to imagine for him without the Made in England label, says car expert Stefan Bratzel from the University of Economics in Bergisch Gladbach, giving the British House of Lords protection of existence, just like a few premium suppliers for Leather or luxury accessories. But with a total of not even 50,000 units per year, no industry can be fed. This may be important for prestige, but for the overall production these brands are rather secondary.
Even smaller but possibly even more valuable is the Formula 1 industry, which is almost exclusively centered in Great Britain. “Because a lot of know-how is generated there, from which the manufacturers on this side of the Channel also benefit, even if only a few developments from Formula 1 fertilize the production vehicles.”says Berylls man Kipferler: “It’s just stupid that even ten F1 teams only employ around 10,000 people – which is no real compensation for closed large-scale production plants.”
2023-07-04 08:37:09
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