2019 UK AUTOMOTIVE TRADE REPORT
2019 UK AUTOMOTIVETRADE REPORTINSIGHTS FROM AN INTERNATIONAL TRADE HUB AT THE HEART OF EUROPE
CONTENTSFOREWORD2019 UK AUTOMOTIVE TRADE REPORTPage 3FOREWORDPage 4 SUMMARYPage 6Page 8 1: SETTING THE SCENE:THE UK AUTOMOTIVE INDUSTRY 2: UK AUTOMOTIVE TRADE SNAPSHOT 3: KEY TRADING PARTNERSPage 13 Page 20 4: CHALLENGES 5: OPPORTUNITIESPage 27 6: RECOMMENDATIONS FOR GOVERNMENTAND INDUSTRYPage 33 Page 35 7: ANNEX: DATA SOURCESFOREWORDIf the course of our futuretrade policy started withthe 2016 EU referendum,we are now at a crossroads.Our trading ecosystemhas as its foundationborderless trade,integrated relationshipswith supply chains andregulatory alignmentacross Europe. Principlesnow under threat from ahard Brexit.Our first UK Automotive Trade Report highlights just howimportant the automotive sector is to the UK economy, andhow simple, frictionless trade is at its heart. This is the firsttime that SMMT’s extensive registration and production datahas been matched to external sources such as the ONS andHMRC to create an in-depth and comprehensive analysis ofthe sector. It paints a fascinating picture of the complexityof the global trading system and the UK’s role within it.Its publication is timely, providing a clearly defined set ofrecommendations to help policymakers and industry keepthis vital sector central to a changing UK trade strategy.This sector is a global trade powerhouse that generatesmore than 100 billion in trade for the UK economy eachyear, and is the country’s biggest single exporter of goods,accounting for 14.4% of total exports – the majority of whichare shipped to our largest trading partner, the EuropeanUnion. The US and Asia are other key markets but the sectoroperates globally, exporting to some 160 countries in total.These are more than just numbers; they represent hundredsof thousands of jobs and livelihoods, which goes beyond largemanufacturers to encompass a broad, delicately balancedecosystem of parts, components and service suppliers.Attracting volume manufacturing to the UK has helped establisha supply chain that supports not just domestic production butadditional export opportunities as well. This adds to the strongpremium and luxury brand presence in the UK traditionally. Morerecently, the UK has seen thousands of exciting start-ups andSMEs emerge, challenging current thinking in terms of mobility.Page 2 2019 UK AUTOMOTIVE TRADE REPORTTHE SOCIETY OF MOTOR MANUFACTURERS AND TRADERSTHE SOCIETY OF MOTOR MANUFACTURERS AND TRADERSAutomotive is ready to inform and assist governmentin promoting the country’s competitiveness around theworld; global trade is complex and it needs the knowledgeand insight industry experts can offer. Looking globally,there are challenges enough without Brexit - evensuperpowers aren’t immune from the effects of tradetensions, unsettling business and consumer confidence.Furthermore, the pathway to zero emission, connected andautonomous vehicles brings with it new business models,disruptors and trade challenges and the UK has to be ina position of authority and influence if it is to meet thesechallenges head on and prosper.The UK needs to be at the centre of future regulatorydiscussions; promoting international collaboration, creatingan environment that boosts trade, easing burdens andminimising or eradicating disruptions to trade flows. Wemust introduce an ambitious global trade policy, goingbeyond comprehensive trade agreements and exploringopportunities to reduce tariff and non-tariff barriers.Over the 10 years since the global financial crisis, we haveproven that the fundamentals of the country’s automotivesector are strong. We have a dedicated workforce,engineering excellence, world famous brands, moderninfrastructure and the technological knowhow to keepBritain innovating and competitive.The outcome of the Brexit negotiations will ultimatelydecide our future trading relationship with the EU and wehope it remains a close and frictionless one. Regardless ofthis, however, the UK must have a strategy that is positive,modern and ambitious. The automotive sector should be atits heart as this report demonstrates that no meaningfultrade policy can keep the UK at the forefront of global tradeand innovation without taking us into account. nMike Hawes Chief ExecutiveThe Society of Motor Manufacturers and Traders (SMMT)2019 UK AUTOMOTIVE TRADE REPORT Page 3
SUMMARYSUMMARYUK AUTOMOTIVE: 101 BILLION TRADE HUBTOP14.4% 44.4 BILLIONAUTO SECTOR LARGESTEXPORTER OF GOODSSource: ONSExported in 2018EU 101 BILLION 57 BILLIONVEHICLES BUILT FOR EXPORT IN 201859.3%81.5%Van productionexportedCar productionexportedUSACHINA1 2JAPAN4SECTOR GENERATESTRADE WORTH MORE THAN1.3 MILLION5CAR EXPORTMARKETS94.3%New van marketimported3TURKEY587.9%New car marketimported(of which 80% from the EU)Imported in 2018SMMT ESTIMATES THETOTAL VALUE OF TRADECOULD INCREASE BY10UK IS RANKEDTHIN THE WORLDFOR ALL EXPORTSIN 2018IF AUTOMOTIVEWAS REMOVEDFROM UK EXPORTSIT DROPS TO14TH20%RECOMMENDATIONSFOR GOVERNMENTAND INDUSTRY 101BILLIONTO 122 BILLIONFROM1: Set forward-looking auto trade strategy2: Preserve current market access3: Strengthen industry engagement4: Seek new trade opportunities5: Lead regulatory discussions6: Enhance domestic customs system7: Foster trade promotion8: Link trade and industrial strategiesBELOW BELGIUM,CANADA, MEXICOAND RUSSIAPage 4 2019 UK AUTOMOTIVE TRADE REPORTTHE SOCIETY OF MOTOR MANUFACTURERS AND TRADERSTHE SOCIETY OF MOTOR MANUFACTURERS AND TRADERS2019 UK AUTOMOTIVE TRADE REPORT Page 5
1: SETTING THE SCENE: THE UK AUTOMOTIVE INDUSTRYmainstream volume car manufacturers in the UK, eight majorpremium and sports car manufacturers, four commercialvehicle manufacturers and eight bus andcoach manufacturers.The UK is also home to the largest number of small volumecar manufacturers and there are more than 2,500 suppliersto the sector.The build-up of output at the Japanese-owned Honda,Nissan and Toyota plants during the 1990s, alongside ongoingproduction at Ford, MG Rover, Peugeot and Vauxhall, helpedlift UK production to a new peak of 1.80 million in 1999 – thebest since 1972’s record 1.92 million units. Nissan beganproducing cars in the UK in the mid-1980s, with Hondaand Toyota starting in the early 1990s. The culture andprocesses utilised at these Japanese-owned plants wereadopted across the sector, helping to improve efficiency andinternational competitiveness.However, by 2006 Ford, MG Rover and Peugeot had ceased carproduction in the UK and Vauxhall had stopped producing cars atits Luton plant. Then with the global recession limiting demand,UK car production fell to below one million units in 2009.1A sustained period of recovery followed, taking productionback to 1.72 million units in 2016. This was supported bystrong growth at Nissan and Jaguar Land Rover, eachproducing over half a million units. Output has since fallenfollowing weaker domestic demand surrounding politicaland economic uncertainty, the slowdown in demand in keyexport markets such as the EU and China, combined withweaker demand for diesel cars and some disruption fromthe switch to WLTP type approved cars. Output in 2018was down 9.1% on 2017 levels at 1.60 million units.SETTING THE SCENE: THE UK AUTOMOTIVE INDUSTRYThe UK automotive manufacturing sector is a bustling European trade hub, moving vehicles,engines, parts and components worth more than 100 billion across the UK’s borders each year.The sector is UK’s largest exporter of goods, worth some 44.4 billion in 2018 – equivalent to14.4% of all goods exported and 7.0% of all exports (source ONS). Some 1.3 million vehicleswere produced for export in 2018.The sector is also a key provider of jobs and wealth creation– with 168,000 people employed directly, a turnover of 82billion and 18.6 billion added to the UK economy in 2018.The UK automotive sector is truly global, with productsexported to some 160 markets. Exports accounted for 81.5%of all car production in 2018, while imports accounted for87.9% of new car registrations.Page 6 2019 UK AUTOMOTIVE TRADE REPORTThe sector has undergone huge transformation over the pasttwo decades to position itself as a key trade hub. There hasbeen significant investment to modernise plants and makethem more efficient, supported by a flexible workforce makingdynamic and reliable products that consumers want.The UK has a strong focus on premium and luxury cars. In2018, 45.8% of all cars produced were premium products(Jaguar Land Rover and MINI), while 1.7% were luxury andsports cars (including globally iconic brands such as AstonMartin, Bentley, McLaren and Rolls-Royce).Commercial vehicle (CV) production recovered in 2018, helpedby growth at PSA’s IBC plant at Luton making the VauxhallVivaro. This plant now accounts for almost three-quartersof UK output – the remainder being predominantly heavycommercial vehicles and buses. Output in 2018 rose 8.5% to84,888 units on 2017.CV production was around 200,000 units between 1999 and2008 but fell with the scaling back and eventual closing ofthe Ford Transit plant in 2013, as well as LDV in 2009 andVauxhall Astravan production by 2013. Today, 60% of CVoutput is exported, predominantly to the EU.The importance of exports has increased in recent years,with 81.5% of cars built for overseas markets in 2018 – thethird highest level on record. Exports in 2000 accountedfor 64.8% of output, and surpassed 70% in 2004 and 80%in 2011. The EU accounts for more than half of all exports.The sector’s success has been dependent on free andfrictionless trade afforded by the UK’s membership of the EUsingle market and customs union.In the event of the UK leaving the EU without a deal, it wouldbring an immediate end to the seamless movement of goods,resulting in disruption and delays at the border, throwingjust-in-time manufacturing into chaos and undermining thecompetitiveness of the sector – ultimately putting profitabilityand jobs at risk and threatening the viability of the sector.Despite the current challenges, the automotive sectorcontinues to undertake a technological revolution, withdevelopments in ultra low emission technology andconnected and autonomous vehicles, as well as data-drivenmanufacture and design. Looking ahead, the potential forthe UK’s automotive sector is significant, but economic andpolitical uncertainty is already having an adverse impact onoutput, investments and job prospects.SMMT data on investment announcements shows thatmanufacturers are putting investment and expansiondecisions on hold until a decision is made on the UK’sdeparture from the EU. Maintaining global competitivenessand an investment base here in the UK is essential topreserving a strong automotive sector. nTHE SECTOR IS A KEY PROVIDER OF JOBS AND WEALTH CREATION168,000 people employed directlyTurnover of 82 billion 18.6 billion added to the UK economy in 2018The composition of manufacturers has also changedsignificantly over this period. There are currently sixTHE SOCIETY OF MOTOR MANUFACTURERS AND TRADERSTHE SOCIETY OF MOTOR MANUFACTURERS AND TRADERS2019 UK AUTOMOTIVE TRADE REPORT Page 7
2: UK AUTOMOTIVE TRADE SNAPSHOTIn the process, the sector – the 4th largest producer of motorvehicles in the EU – has maintained an equilibrium in its tradebalance, with a deficit of just over 12.6 billion despite animport-dominated domestic car market and a regionally integratedsupply chain largely dependent on imported componentry.This was possible thanks to the UK’s diverse automotivemanufacturing base, productivity levels among the mostcompetitive in Europe and a modern, export-driven businessmodel focused on high-value, high-quality finished vehicles.However, after a peak in 2017, expansion has slowed. It is tooearly to say whether UK automotive trade has now enteredinto a downward period or whether cross-border exchangeswill soon overcome the bearish trends.UK AUTOMOTIVE TRADE SNAPSHOThub. The industry is the driving force behind UKexports of industrial goods and a significantcontributor to the UK’s total exports.n Automotive imports are essential for the sector,covering the vast majority of new car sales andsupply chain production inputs.n An incredibly diverse automotive manufacturingbase, affluent domestic market and open tradeand investment policy allowed UK automotivetrade to quickly overcome the impacts of thefinancial recession in 2008.n Declining trends in the last year show theimpact of uncertainty linked to the UK’s futurerelationship with the EU, internationaltrade tensions, falling confidence amongconsumers around the world and globalindustrial challenges.Page 8 2019 UK AUTOMOTIVE TRADE REPORT2The resolution of internationaltrade tensions34Today, without exports of motor vehicles, the UK wouldlose its position as the world’s 10th biggest exporter ofgoods and slip to 14th place, behind Belgium, Canada andMexico and Russia (WTO data).In less than a decade, the UK automotive sector has transformeditself from a relatively sluggish market into a bustling tradehub, importing and exporting millions of cars, engines, parts andcomponents across the world.THE SOCIETY OF MOTOR MANUFACTURERS AND TRADERS2018, cars dominated exports of finished vehicles witha 96% share of the total, while CVs represented only4% of exports.In volume terms, 2016 saw a record-breaking 1.4 millionvehicles leaving British production lines for overseas markets.However, despite maintaining a sustained export share, unitsshipped abroad declined to 1.28 million vehicles in 2018. Onaverage, four in five cars and three in five CVs produced in theUK are destined for export.CHART 2 UK VEHICLE PRODUCTION FOREXPORT MARKET BY VOLUMEAll VehiclesCarsCVs160The sector’s ability to maintain a strong,diversified product portfolio1,400140The sector’s ability to adjust to globalindustrial challenges such as vehicleautomation and electrification.1,200120TRADING WITH THE WORLDIn 2018, almost 10 years after, UK automotive trade wasworth more than 101 billion, an increase of 118% comparedwith 2009. Exports of motor vehicles, trailers and semitrailers, including related parts and accessories, aloneamounted to 44.4 billion in 2018 – almost as much as totalautomotive trade in 2009 (ONS data).vehicles has been destined for overseas markets. In1,600CHART 1 TOTAL AUTOMOTIVE TRADE BY VALUEExportsIn 2009, the global financial crisis seemed to havewiped out more than 10 years of slow and steadygrowth of UK automotive trade exchanges. With UKmanufacturing, imports and exports of automotiveproducts at record-breaking lows, no-one couldpredict that the sector was about to experience aphase of unprecedented expansion.Since 2006, at least 75% of UK production of 20020040,000CVs - thousandsn The UK automotive sector is a vibrant tradeThe automotive industry’s contribution asa driving force behind UK trade in goodstoday is a key success built up over adecade of investment.The future trading relationshipbetween the UK and the EUThe UK automotive industry is increasingly export-led.Cars and all Vehicles - thousands1 million2THE SECTOR’S TRADE OUTLOOK WILLLARGELY DEPEND ON FOUR FACTORS:FINISHED VEHICLE EXPORTS000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18Source: SMMT30,000As a percentage of total production, exports of passengercars peaked in 2011, covering 83.7% UK car production anddriving the sector’s comeback after the 2008 crisis. Despitea recent contraction of total manufacturing outputs, exportlevels have been sustained. 81.5% of UK-built cars wereexported in 2018.20,00010,000000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18Source: ONSTHE SOCIETY OF MOTOR MANUFACTURERS AND TRADERSIn value terms, car exports fuelled the sector’s expansivephase. The structural overhaul of the sector in the 2000s hasbuilt resilience into the UK automotive industry, allowing UKcarmakers to capture regional and global trade opportunitiesthrough high-value exports after the global financial crisis.2019 UK AUTOMOTIVE TRADE REPORT Page 9
2: UK AUTOMOTIVE TRADE SNAPSHOT2: UK AUTOMOTIVE TRADE SNAPSHOTCHART 3 TOP 10 UK GOODS EXPORTED 2018 (VALUE)Road vehicles (including air cushion vehicles) 39.9 (11.1%)Petroleum, petroleum products & related materials 27.3 (7.6%)Gold Non-Monetary (Exc Ores & Concentrates) 24.2 (6.7%)Medicinal & pharmaceutical products 23.5 (6.5%)Miscellaneous manufactured articles n.e.s. 21.3 (5.9%)Other transport equipmentTraditionally, the UK is an affluent market for finishedvehicles, with low brand loyalty. These factors createa highly competitive domestic car market – the secondbiggest in the EU after Germany. Competition isstrengthened by attractive financial packages for carbuyers, as well as a business-friendly environment.Against this background, it is no surprise to see importsplaying a major role in the UK car market. Following theclosure in the early 2000s of some assembly plants oflong-time investors such as Ford, MG and PSA, the share ofimports rose from 71.7% in 2000 to more than 85% in 2006. Arecent uplift in 2018 marked an all-time record share of 87.9%enabling unsurpassed UK consumer choice. 30.0 (8.3%)Power generating machinery & equipmentFINISHED VEHICLES IMPORTSCHART 6 UK REGISTRATIONS OF IMPORTED CARS 16 (4.4%)Volume 14.3 (4.4%)General industrial machinery & eqp. & machine pt.n.e.s. 13.7 (3.8%)Ele machinery, app & appliances & ele pt thereof n.e.s. 10.3 (2.9%) Billion 0 10 20 40 50TOTAL GOODS EXPORT: 361.1 BILLIONThe diversification of the industry’s export portfolio results from a large UK manufacturing base, with exports of premium and specialistvehicle manufacturers (SVM, luxury and sports cars) capturing high-value markets and volume exports supporting the creation of astrong domestic supply chain. Export trends for CVs are more volatile. In volume terms, this market never reached pre-crisis exportlevels. This industry is cyclical and has a dependence on one volume manufacturer so has experienced large percentage swings whencompared year on year. In 2018, 59.3% of CVs were destined for export markets, down from 62.5% in 2017. The exports peak was 73.3%in 2009, but was below 50% in 2014/2015.CHART 4 UK CAR EXPORTSBY TYPE (VOLUME)PremiumCarsSmall Volume Manufacturers80018.070017.8CVsAll 20152016201716.22018Source: SMMT1.875%1.670%1.465%With regard to CVs, alongside the overall market for vans,import volumes have risen strongly since the recession.In 2018, imports stood at 337,078 units, 47.6% up on 2008,compared with 23.4% growth in the market overall. Importsshare over this period has risen from 78.9% to 94.3%, havingpeaked at 94.9% in 2017. During the last decade, Ford Transit,LDV and Vauxhall Astravan production all ceased, supportingthe significant shift to imports.400Import volumeImport share40%00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18Source: SMMTTHE SOCIETY OF MOTOR MANUFACTURERS AND xports100%35060%50%CHART 8 ENGINE TRADE (VALUE)60%70%008 09 10 11 12 13 14 15 16 17 18Source: SMMT1Page 10 2019 UK AUTOMOTIVE TRADE REPORTIn 2018, 2,715,400 engines were built in the UK, maintaining recordlevels of production, generating 8.5 billion turnover value in lightvehicle engine production and supporting 8,000 jobs.00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18Source: SMMT70%16.40201380%ENGINES TRADEShare3002.01.2Volume - thousands60085%CHART 7 UK LCV REGISTRATIONS (VOLUME)17.6SVMs - thousandsVolume and Premium manufacturers - thousandsVolumeCHART 5 UK VEHICLE EXPORTSBY SHARE OF TOTAL VOLUME2.2ShareSource: HMRC 30Volume - millionsProfessional, scientific & controlling ins & app n.e.s.90%On the other hand, progressive opening to internationalcompetition has forced UK car manufacturers to increasetheir competitiveness, specialise in profitable marketsegments and seek new ma
Automotive is ready to inform and assist government in promoting the country’s competitiveness around the world; global trade is complex and it needs the knowledge and insight industry experts can offer. Looking globally, there are challenges enough without Brexit - even superpowers aren’t immune from the effects of trade tensions, unsettling business and consumer confidence. Furthermore .
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