The two preceding articles in this three-part daily series on the future of the UK automotive industry have explored the impact of tariffs on the supply chain and questioned whether major carmakers will move their plants overseas. The final part looks at the likely futures of the premium and niche manufacturers who have bases in the UK.
Britain’s biggest car manufacturer JLR faces unique challenges to production. The company is heavily invested in the UK, where it built 450,000 vehicles across its portfolio of plants last year.
The most recent investment was news of an estimated £1bn going into its Castle Bromwich plant to produce a future range of electric vehicles, alongside the Jaguar cars currently turned out there.
JLR’s other UK plants – Halewood, which produces the Evoque and Discovery Sport, and Solihull, where the Range Rover, Range Rover Sport, Velar and F-Pace are built – all have between two and five years before new models are due.
Whilst JLR has a huge UK footprint, and chief executive Ralf Speth has stated that the brand's “commitment to UK production remains firm”, it has located much work abroad. A giant £1bn factory in Nitra, Slovakia with an annual capacity for 150,000 cars opened last year, and the company has plants in China and Brazil as well. Contract manufacturers in Europe are also part of its operation.
But its engine factory in Wolverhampton, backed by investment in electric powertrains, means the company relies on the UK to power its vehicles.
Speth has always said that JLR will remain “British-engineered brands” – a relief to the almost 15,000 engineers and designers at the company’s bases in Whitley and Gaydon in the Midlands – and the marques trade heavily on their heritage.
However, in the global world of automotive manufacturing, this doesn’t guarantee where cars will be made if costs become onerous. For example, the new Land Rover Defender – the latest iteration of the iconic car that trades heavily on its ruggedness and British design – will be built in Slovakia.
Justin Benson, head of automotive at KPMG, says: “As UK manufacturers continue to make Britishness a part of the sales process they will have to produce in the UK – for now. But consumers will buy cars made overseas if the marketing is right.”
Rolls-Royce staying put
For BMW-owned Rolls-Royce there is no question of the marque ever leaving the UK and its current base in Goodwood, West Sussex. Its boss, Torsten Müller-Ötvös, has called such a move “unthinkable”.
The luxury brand trades on its British craftsmanship and the price bracket it operates in, combined with the low volumes is produces, mean costs related to Brexit can be built into the price with customers unlikely to complain. This means the company’s 2,000 staff, who build about 4,000 cars a year, have a near-guaranteed future with relocation a prospect many think would destroy the brand.
Also owned by BMW is Mini, which is based in Oxford, where 4,000 staff last year built 190,000 of the cars made famous by the the film The Italian Job. The plant was recently retooled at a cost of tens of millions to be able to make electric Minis alongside conventionally powered cars. This was a relatively small investment compared with the £500m that has gone into the plant over the past decade.
New models are not due for at least three years, and the heavy investment and scale of the plant means production is likely to remain there – though more of it could be shifted to a sister plant in the Netherlands servicing European demand while Oxford supplies the rest of the world.
BMW also has an engine plant employing 1,000 people at Hams Hall near Birmingham which has already seen the impact of Brexit. It no longer produces engines for BMW’s X3 car which is assembled in South Africa, with engines from German plants now used to get around “rules of origin” controls requiring a certain amount of cars to be built in the EU to be eligible for favourable export conditions. Production of engines for cars made in the US has been increased to help offset this.
The other BMW base is a pressing plant in Swindon which produces body parts, mainly for the Mini, but also some components for the company’s factories in Germany. If the Mini Oxford factory were to relocate, it would likely close.
Britain also has an unrivalled sector of niche manufacturers such VW-owned Bentley in Crewe, Aston Martin in Gaydon, and McLaren in Woking. Servicing the luxury market, their pricing and low volumes mean they can generally absorb the likely impact of Brexit, and their branding is so heavily dependent on 'Britishness' that relocation is unlikely to ever be an option.
Status quo to remain
A no-deal Brexit will bring huge challenges to UK carmakers but, in the very short-term, little is likely to change. Manufacturers are committed to the UK for years to come, and unwinding agreements early will be costly and complex.
There may even be some benefits, with the weaker pound making cars built here cheaper to foreign buyers – although import costs and tariffs could well outweigh this.
However there is hope. “The fundamentals of the UK car industry are strong,” says SMMT chief executive Mike Hawes. “We have a flexible workforce, excellence in engineering and are highly productive – if we get a good deal the future is strong.”
But he warns that without a trade deal “investment decisions that need to be taken are likely to come in weeks, not years”. He also cautions that they aren’t likely to be positive for Britain, with further efficiencies in the industry to compensate for the impact of tariffs, customs and border delays hard to find.
KPMG's Benson takes a similar view. “If we have five years of model production and can see some sort of trade deal in that time then the car industry should survive, without it… the picture is not so bright.”
Everything hinges on a deal, agrees Ian Henry of AutoAnalysis. “A good deal and a good trading environment (i.e. the market not shrinking further globally) means we could see production up to 1.6 million in a few years,” he says.
“A bad deal would mean production below one million with Vauxhall and Toyota probably going, JLR pushing more production to Slovakia, and BMW rebalancing the Mini towards Europe. If we get a bad deal, all bets are off.”