Across the world, the automotive industry is facing a range of distinct headwinds, each of which is weakening consumer demand for cars. In addition to ‘DieselGate’ there was the introduction of a more rigorous emission testing procedure, plus growing unease about the direction of the global economy; an unhelpful combination sowing further consumer confusion about their outlook for personal finances and the future of cars.
Because adding to these ‘one-off’ or cyclical factors, the sector is also undergoing a period of profound structural change, driven by developments in automotive technology, automation and shifts in consumer preferences. While vehicle production and sales are down, registrations of Electric and Alternative Fuel Vehicles increased by 13.8% in the year to May, reaching a 6% market share. And while 72% of us now drive more than ever before, we’re driving less (1,400 fewer miles each year on average) compared with 2003.
While factors such as uncertainty will eventually clear, others are trends set to shape the industry for years to come. The sector currently plays an important role in the UK economy. Transport manufacturing added £15.4 billion to UK GVA in 2018, or 0.8% of the total. Nearly 190,000 people are directly employed in manufacturing, with almost 0.9m across the whole industry.
It’s productive work too. Automotive jobs created £51 for every hour worked in Q4 2018, almost £16 more than the average. Few industries outside Finance, IT and heavy industry add more value per hour. It invests heavily, especially in the critical innovation-augmenting assets such as R&D. The transport sector contributed 15% of UK businesses R&D investment in 2017, or £3.6bn. That’s a 191% increase since 2010.
So, while the sector's current weather is indeed gloomy and the UK’s place in this evolving automotive landscape is not yet set, at least the foundations are good.
Find out more and access the full NatWest UK Automotive PMI®, which reports that a sustained drop in the UK automotive sector output highlights the need for collaborative solutions. The report is based on responses from UK automotive sector manufacturers and benchmarked against equivalent indices for Europe and the rest of the world.