Today, in partnership with Santander, we publish our inaugural quarterly sector bulletin. This will be part of a series of reports taking an in depth look into a particular sector; its structure, supply chain, trade channels, recent performance, and both risks and opportunities in the short and long term.
We kick things off with the automotive sector, which has experienced an impressive renaissance in recent years.
We have picked out 7 key highlights from the report:
1) International automotive supply chains are changing
The days of offshoring manufacturing components across the globe, particularly to South East Asia are coming to an end. There is now an increasing trend for automotive manufacturers to re-shore their operations closer to sales markets, with a single nearshore destination consisting of manufacturing, production and assembly plants all located in close proximity.
2) The automotive sector is underpinned by a complex supply chain structure
A small number of Original Equipment Manufacturers (OEMs) sit at the top of the supply chain, heading a tiered structure dominated by a large number of SMEs beneath. The complexity arises from the requirement for the correct, high quality component parts arriving on time from various different sources, to allow for efficient assembly at OEM plants.
3) There’s more scope to increase domestic production
80% of components in British cars could theoretically be produced in the UK. There is therefore clear scope to re-shore production of component parts to the UK, bringing with it various benefits to the domestic supply chain and UK economy.
4) UK automotive is the 9th largest automotive exporter in the world
UK automotive exports have grown spectacularly since the turn of the millennium. Between 2000 and 2015, the value of total UK automotive exports has more than doubled, with substantial growth coming from emerging markets.
5) The automotive sector is a success story
The emergence of low cost manufacturing nations, such as China, was considered by many as the end of volume production in the UK. However, the automotive sector adapted, and through various initiatives and investments has thrived. Between 2009 and 2015, the industry invested over £12 billion in R&D, turned over £347 billion, nearly doubled exports and increased labour productivity by 50%.
6) But there are significant challenges ahead
Not just Brexit! Of course rising input costs from the weak pound, and uncertainty regarding future trade deals are of great concern. But bridging the growing skills gap remains a long term issue, one that manufacturers frequently cite as one of the top threats to future growth.
7) Long-term success will depend on how automotive manufacturers harness technological advances
The automotive sector is innovating fast, with connected, autonomous and electric vehicles very much the future. However innovation is not just taking place on the final products, the process by which they are made is changing through the development of 4IR technologies.
You can read the full report here, and if you want to find out what the automotive sector thinks about the year ahead, check out the results of our 2017 Executive Survey.