This week the focus for Sector Friday is motor vehicles. The sector is made up of manufacturers of motor vehicles for transporting passengers or freight, this includes passenger cars, buses, street sweepers, vans and makes up 69% of the sector. The manufacture of various parts and accessories, e.g. engines, brakes, gearboxes, catalytic convertors, and the manufacture of trailers and semi-trailers and caravans is also included and is the remaining 31% of the sector.
About the sector
- The sector employs 129,000 people across 2,703 firms.
- It’s estimated that every job in UK vehicle assembly supports 7.5 elsewhere in the economy.
- Nearly £30bn worth of output was exported in 2011, accounting for nearly 12% of total manufacturing exports.
- R&D spend grew by 23% in the sector between 2010 and 2011 and the accounted for a third of the increase in overall R&D spend in manufacturing.
- The sector accounts for 5% of total manufacturing output.
In 2012, the UK produced 1.58m vehicles (cars and commercial vehicles), up 7.7% on 2011, as well as 2.5m engines (-0.3% on 2011). In comparison, vehicle production in 1998 stood at 1.98m. The UK accounted for 1.8% of worldwide vehicle volume in 2011; in 1998 this was 3.7%.
Production levels placed the UK at 14th (out of 40 International Organization of Motor Vehicle Manufacturers country members) for total vehicle volumes, 13th for car production and 21st for commercial vehicle production in 2011.
7 volume manufacturers,
8 commercial vehicle manufacturers,
11 bus and coach manufacturers,
10+ niche and specialist manufacturers,
2000+ suppliers, and
8 F1 teams in the UK.
A lot of the industry is centred around the West Midlands and NE but there are also significant production facilities in the NW and SE.
Foreign ownership has long been a feature of automotive companies based in the UK – in 1952 Ford and GM had a share of nearly a third of the British market. The volume car manufacturers producing in the UK are all foreign-owned, but have chosen to produce in the UK because of high productivity levels, a skilled workforce and availability of high quality suppliers. 2012 saw numerous and considerable investment announcements from these OEMs, despite a weak and uncertain European outlook, further boosting the UK automotive industry as a whole and providing opportunities and confidence for supply chains.
83% of UK produced cars, 57% of CVs and 62% of engines, are exported. The largest 5 export destinations by value in 2011 were the US, Germany, China, Belgium, France. The exposure of the sector to markets outside of Europe are holding it in good stead, around 45% of UK exports are to EU countries, compared with 70-90% for Italy, France and Spain. Growth in exports of motor vehicles has been strong, and non-EU exports have risen by nearly 90% in the ten years to 2012 and exports of cars have increased from 65%-80%+ in the same period.
Future of the sector
Vehicle production in the UK is estimated to increase by 9% p.a. to 2.2m in 2016 and PwC estimate that supplier opportunity in UK market set to increase to £21.5bn in 2016 from £11bn in 2012.
Emerging economies, especially China, India and Mexico, will provide the main growth area for manufacturers, with limited growth in Europe. Overcapacity in the European market remains as a risk, but hopefully the mix of export destinations will continue to serve the UK sector well.
OEMs will be looking towards the needs and wants of these emerging economies as they will be providing demand, and will produce and adapt models to suit. The move to low carbon vehicles is also a big area, the UK government has committed over £450 million towards putting the UK at the forefront of the development, demonstration, manufacture and use of ultra-low carbon vehicles. Producers must also adapt to regulatory pressures such as lowering emissions and reducing engine noise.