The state of the UK Automotive Industry - 2019 UK Automotive Trade Report

July 7, 2019

UK’s automotive industry is the country’s single biggest exporter of goods and accounts for more than 14% of total exports. The industry generated a turnover of £82 billion and added £18.6 billion to the UK economy in 2018. However, with dropping new car sales numbers and economic and political uncertainty, the future of the industry is unclear. 

SMMT’s new 2019 UK Automotive Trade Report combines data from SMMT, HMRC and the ONS to reveal the current state of the industry and provide recommendations on how to prepare for future challenges and opportunities. 

In this blog, we summarise the key findings and the biggest challenges and opportunities for the industry in the coming months. 

The challenge of Brexit 

A key concern for most businesses in the country in the coming months will be the uncertainty around Britain’s exit from the European Union. For the increasingly export-led UK automotive industry, the stakes are high with potential friction at the border predicted to cost the industry £50,000 a minute. SMMT reports that the industry could be losing up to £70M a day due to delays in parts delivery from the EU in the case of a no deal Brexit. 

Export is increasingly important for the UK automotive industry with 81.5% of cars built for foreign markets in 2018 with more than half of those going to EU countries. The European Union dominates both the export and import receives 53% of UK-built cars and 79% of imported cars. At the moment the UK automotive industry benefits from tariff-free shipping to and from the European Union but in the case of a no-deal Brexit, it may lose preferential access to its key markets. The potential reintroduction of bilateral tariff and non-tariff barriers could have a negative impact on the industry. SMMT reports that tariffs on UK exports to light vehicles will amount to £1.9 billion. 

 Source:  SMMT - 2019 UK Automotive Trade Report
 Source:  SMMT - 2019 UK Automotive Trade Report  [/caption]  

Embracing the rise of automotive services 

One of the key opportunities identified by SMMT is automotive services. The UK automotive industry is in a good position to benefits from its expertise and innovation in a range of services from engineering and manufacturing to maintenance services, automotive marketing services and Mobility as a Service (MaaS). 

The UK’s aftermarket industry generates more than £21 billion in revenues and contributes £12.2 billion to the UK economy, but SMMT reports that is only a fraction of what the UK can earn from maintenance services globally.

The increasing interest in automotive services and Mobility as a Service (MaaS) is another area from which the UK market can benefit. According to a 2018 report by PWC, today, less than 3% of industry revenues and less than 1% of profits come from connected services and mobility services. By 2030, these may be around 30%.

The UK has had a significant role in technological innovations in the industry such as autonomous driving, connected vehicles, data-driven design and manufacturing and continued investment in research and development 

The global automotive industry is going through a major shift in the way vehicles are manufactured, powered and driven. In order to benefit from the opportunities, the UK auto industry needs to focus on strong trade partnerships and continued innovation. 

Key recommendations 

Here are the recommendations SMMT provides to the UK government and the industry: 

  1. Set forward-looking auto trade strategy - The first recommendation made by the SMMT is to put the automotive industry at the heart of UK trade policy regardless of the outcome of Brexit negotiations. 
  2. Preserve current market access - Ensure there are no additional barriers to trade between the UK and EU and maintain preferential access to key markets. 
  3. Strengthen industry engagement - SMMT calls for close collaboration between the government and the automotive industry. 
  4. Seek new trade opportunities - Reducing tariff and non-tariff barriers are one of the suggested ways to improve market access. 
  5. Lead regulatory discussions - SMMT highlights the need for the UK to remain at the forefront of international automotive regulations. 
  6. Enhance domestic customs system - SMMT advocates for improving the UK’s domestic customs systems by investing in digital and physical infrastructure and ensuring trade doesn’t face costly delays.  
  7. Foster trade promotion - SMMT calls for financial support for innovative UK companies venturing into distant and risky markets to help alleviate costs associated with significant language and cultural challenges, complex regulatory environments and market access barriers. 
  8. Link trade and industrial strategies - Finally, SMMT’s report highlights the importance of mutually supportive trade rules, industrial strategies and investment plans. 

As the global automotive industry is going through a major shift in the way vehicles are manufactured, powered and driven, the UK auto industry faces the added pressure of mounting economic and political uncertainty. While the UK auto industry is faced by numerous challenges, there are also a number of opportunities that the industry is well positioned to explore. With the right Brexit deal, sustained investment in innovation and alignment between government and industry, the UK automotive industry has the chance to ensure a more stable future.

Read the full report here