Sector spotlight: automotive

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The automotive sector, in particularly car production, has had a solid few years of growth following a low point in production numbers seen in 2010. Car volumes are not yet back to the most recent high of 1,534,567 units produced in 2007, but can this level be reached in 2014 or 2015?


Final picture for 2014 due soon

Next Friday (23 January), SMMT will publish the full 2014 production figures for the automotive sector and we can see how the year stacks up against a strong 2013. The data up until now have shown a pretty flat picture for car production, commercial vehicle production down 22% and engine production down 7%.

Whilst export market uncertainty has negatively impacted UK car production, recent investments and continued demand for UK produced cars means the sector goes into 2015 in a strong position to achieve growth in the year ahead.

A hangover from restructuring of UK commercial vehicle (CV) operations has hit production in 2014. Although CV exports remain soft, a strong home market, coupled with new model production increasing, means a more positive 2015 should be on the cards.

The impact of retooling for new models affected engine production in the fourth quarter of 2014, but investments into UK engine manufacturing point to a more confident long-term outlook.


Wider transport sector has relative confidence in year ahead

In our Executive Survey 2015, the broad transport sector (which includes both motor vehicles and aerospace manufacture), stood out in a few areas.

Overall, manufacturers’ views of industry prospects in the year ahead have softened compared with a year ago. Over a third of companies forecast an improvement in industry conditions, a step down from the 62% of respondents predicting growth in 2014. Of the remainder, a quarter indicated that they expected activity to remain broadly the same, with a quarter planning for deterioration in trading conditions. The overall view going into 2015 is still more optimistic than in either 2012 or 2013.

While all sectors have in common a lower balance of companies planning for growth in 2015 versus a year ago, the relative confidence across sectors such as rubber and chemicals and transport sits in contrast with expectations of decline in the electrical and machinery sectors. Indeed, the transport sector is one of the only sectors to report positive industry expectations in each of our four annual surveys.

On the whole, there is a lack of confidence in global economic prospects for 2015. Whilst all sizes of companies are expecting a fall in global economic prospects, there are more differences by manufacturing sub-sector. The wider transport sector is the only area with a positive overall outlook for the global economy this year. Motor vehicles has benefited from a slight pick-up in demand in Europe and higher levels of exposure to emerging markets, while other transport benefits from long-term order cycles. All other sectors still post a negative balance outlook.


Senior Policy Researcher

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