The EU accounts for 21% of global car production, the second-largest producer world-wide, and 27% of total EU exports to the US are light vehicles, worth approximately €8.8 billion according to the European Automobile Manufacturers' Association (ACEA). However, growing trade tensions between the EU and US have had wide-ranging impacts on manufacturing performance across many sectors in Europe, including higher prices for metals and severe supplier delays. Vehicle manufacturers have been hit by rising operating costs, with concerns about tariffs only adding to uncertainty across supply chains.
In addition, there are concerns for the prospects of a no-deal Brexit and its impact on new investment. Japanese car manufacturer Nissan has confirmed news that their new X-Trail SUV will no longer be built at its UK plant citing Brexit as the main reason for this decision.
Nissan Europe chairman Gianluca de Ficchy said: “While we have taken this decision for business reasons, the continued uncertainty around the UK's future relationship with the EU is not helping companies like ours to plan for the future.”
This blow to the UK economy by Nissan is just the most recent in a string of car manufactures pulling out of the UK due to trade damage Brexit is sure to cause. In 2018, under similar circumstances, Jaguar Land Rover halted production at its Solihull plant. Similarly, Asia's automotive manufacturing dominance just hit a wall. China, Japan, South Korea and Taiwan all saw their purchasing managers’ index for manufacturing hit a two year low in 2018 with behemoths Hyundai Motor, Kia Motors, GM Korea, Ssangyong Motor and Renault Samsung seeing their combined sales drop 4.9% in Asia.
This could give the impression that the auto industry is slowing down, or even receding. Outsiders may begin to assume that the entire economic sector is moving collectively in the same direction, but it is very rare that the global auto business will move in tandem this way. In fact, one manufacturing plant slows down, another plant speeds up. An unused industrial building attracts a new owner in a new segment. One global company changes its course and another company steps into its vacancy to make a go of it.
This can be seen with Toyota and Mazda jointly building a new plant in Alabama and BMW expanding its plant in South Carolina, already its largest factory in the world, and it is considering adding an engine plant in the United States, too. Indeed, even as Land Rover Jaguar were restructuring their UK operations, they announced their best year ever for sales in the US, leading to speculation of a new production site in North America.
Of course, technology is also impacting on investment flows. The large EU component suppliers such as Bosch, Valeo, Hella and Magneti Marelli are investing heavily in new facilities to meet the demands for electric and autonomous vehicles. The US is becoming an increasing attractive location for these investments.
So the industry isn’t dying, it’s simply evolving worldwide to create a new era of products that are reliant on new technologies, made of different materials, addressed to changing social demands, built by different processes, and sought by new competitors and partnerships looking for market opportunities that are just dawning. The US is in the perfect position to take advantages of these evolving trends. With a high availability of labour force and infrastructure, US states are in the position to offer these benefits to manufacturers who are still looking to maintain a strong western presence in the market whilst avoiding economic uncertainties. Governments, local authorities and utilities understand that there is always opportunity. For every force in the industry, there is a contrarian, competing force. And for cities and nations, benefiting from the activity is only a matter of resolving to be part of it and making themselves ready for it.
Here at HMC, we have a team dedicated to the advanced engineering sector who are busy preparing for the Automotive Components Supplier Event in Stuttgart in May 2019. We are working with our clients to identify opportunities and make introductions to the key decision makers. For more information on the event and how we can support your investment activity, please that contact Michael on +44 2890662333 or firstname.lastname@example.org .
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