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Wheel of fortune

By / 1 month ago / Features / No Comments

After a run of downbeat announcements, could Jaguar’s XJ news be the start of something good to come for the UK auto industry? Natalie Middleton picks the industry experts’ brains.

The electric XJ forms part of a £1bn investment being made by Jaguar to retool its manufacturing plant in Castle Bromwich

Months of almost torrential storms for the UK car industry saw a break in the clouds in July when Jaguar revealed plans to invest billions in building an electric XJ saloon at its Castle Bromwich plant.

In a year when Honda announced it would close Swindon from 2021 while Ford said its Bridgend engine plant would go in 2020 – and with SMMT stats showing UK car production was down 18.9% for the first seven months of 2019 – the JLR announcement was a rare ray of sunshine; even if CEO Ralf Speth did add that UK gigascale battery production was crucial for the car sector to survive in the long term.

More recently, BMW Group has launched its new electric Mini, which is being manufactured in Oxford, while PSA has said it will build the next generation of the Astra at Ellesmere Port if the terms of the Brexit deal prove suitable.

Could this be the start of good things to come? And what’s proving to be the major issues for UK car production?

According to NatWest principal economist Stephen Blackman – quoted in the firm’s new UK Automotive PMI report – the UK automotive industry is facing a “range of distinct headwinds, each of which is weakening consumer demand for cars”, as well as a period of profound structural change, “driven by developments in automotive technology, automation and shifts in consumer preferences”. And the report warns that the industry is seeing its sharpest downturn in business conditions for six and a half years.

Independent automotive consultant Dean Bowkett agrees there’s a range of issues at play here, not least Brexit – where he warns that Prime Minister Boris Johnson should not place primary focus on leaving the European Union but instead on what trade deals we can put in place globally. But while Bowkett adds there is undoubtedly going to be a need to refocus UK manufacturing on a more global basis, he also points out wider problems seen in other markets. The Chinese economy is slowing down while Germany is in the midst of the deepest manufacturing slump for six years as exports fall due to continuing global trade tensions. As a result, the European Central Bank has had to cut its 2019 GDP forecast from 1.7% to just 1.1% for the eurozone; the lowest it has been since 2013 when it was -0.2%.

Bowkett adds that the introduction of the WLTP testing cycle in just a little over a two-year timeframe has brought its own issues while the ‘War on Diesel’ has decimated new diesel car sales without bringing countering rises for ULEVs. Instead, drivers are flocking back to petrols, reviving the greenhouse gas issue again. He also warns there are some major infrastructure issues which are not being considered in the push for a 2040 all-electric automotive future.

Yet, according to the NatWest report, while drivers are currently on the edge of the ‘first to move’ precipice for EVs, mass migration – when it does come – will bring major opportunities that British manufacturers should capitalise on.

Natasha Patel, associate director at KPMG, agrees there are opportunities with government plans for the UK to be a world leader in producing zero-emission vehicles but says more policy support is needed.

And she agrees with the idea that the UK must work on its battery supply chain to make the connected car and EV industry thrive. “If the UK is to lead on zero emissions and specifically battery electric vehicles they must have a supportive UK-based battery supply chain – just as the Faraday Institute and Innovate UK have been urging the industry and government to do,” she adds.

Felipe Munoz, JATO’s global analyst, also says the UK must take the initiative on new technologies as he warns that unless the country finds a stronger position within Europe or signs new trade deals with other developed economies, its most likely route is to become a small car manufacturer.

Instead, Munoz says Brexit could be an opportunity to reposition the country within the global auto industry, rather than try to recreate the successes of the past. “Manufacturing is of course a key component of this industry, but won’t be the only factor to consider in the coming years. The UK can still be a key player by positioning itself as a leader in new technologies like self-driving cars, connectivity, batteries or car sharing solutions. That’s where the profits will come from in the future.”

Rupert Pontin, director of insight at Cazana, also says that technology could well be the “silver lining in the clouds gathering around us”.

He continues: “Ensuring that investment into research and development of enhanced safety systems and autonomous vehicles is kept in place and the UK has the skill set to be able to develop these solutions will be key to economic stability and growth. The Government would do well to remember this.

“The country urgently needs stability and direction without further delays to the Brexit process.

“The UK can still be a key player by positioning itself as a leader in new technologies like self-driving cars, connectivity, batteries or car sharing solutions.”

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Natalie Middleton

Natalie has worked as a fleet journalist for 16 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day. As Business Editor, Natalie ensures the group websites and newsletters are updated with the latest news.