Cars have been produced in the UK for over 100 years, since the birth of the British auto industry. The country is famous for its old sports cars and premium brands like MG, Aston Martin, Lotus, Caterham, McLaren, Morgan, TVR, Bentley, Rolls Royce, Jaguar, Land Rover and Mini, which were 'born' in the UK. Today, it is the mass-market brands like Toyota, Honda, Nissan, Ford, Opel/Vauxhall, Tata-owned JLR and BMW-owned Mini that dominate the UK’s auto production and export industry.
The auto industry in the UK has been a great success over the past two decades.
Both domestic brands and foreign brands have contributed to record high production levels of 1.8 million per year (as is expected for 2017), close to the all-time-high of 1.9 million in 1972. A large share of the vehicles are exported – almost 900,000 are sent to the rest of Europe while over 500,000 are exported to other regions, with US and China as the largest receiving markets.
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Not surprisingly, after five consecutive years of growth, light vehicle sales in the UK have slowed down. Sales of three million units are expected in 2017: out of this figure, around 400,000 of these vehicles are produced in the UK while 2.1 million are imported from Europe.
Taxation and customs control issues
When Brexit was announced, it rattled the UK auto industry with many UK-based manufacturers demanding a commitment from the government on issues like taxes on European parts and on vehicle exports, as well as the impact of currency fluctuations.
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Additional taxes on vehicles will have an influence on pricing and sales; if no taxes are introduced, UK light vehicle sales are expected to stay flat, at around 2.8 million units per year.
Today, over 50% of the 30,000 parts needed to produce a typical UK-made vehicle are imported. Some parts even travel back and forth over the English Channel before the final assembly.
A tax on these parts will impact the mass market producers who operate with a low margin. If customs controls are introduced, it will slow down the flow of parts to the UK, hampering planning and forcing the auto manufacturers to keep higher stock levels, meaning higher costs.
Bright signs for the industry
In the global car manufacturing world, each plant competes within the OEM Group regarding the allocation of production sites for different models. These decisions are largely based on their lean manufacturing strategy and each location’s competitive advantages.
After the dust settled in the wake of the Brexit decision, there was some positive news for the UK automotive industry.
Nissan announced that they would produce the next generation of Qashqai and X-Trail in the UK while Toyota said it would invest over EUR 250 million in their plant in the Midlands. BMW plans to produce the new electric model of its Mini in the UK.
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This signals a positive – but cautious – outlook for the UK auto industry.