November 26, 2015    3 minute read

Is the UK car industry growing once again?

   November 26, 2015    3 minute read

Is the UK car industry growing once again?

The UK’s car industry looked to have decayed when Rover collapsed in 2005.  Rover has been known as a “pass the parcel” for years having been sold by the government to British Aerospace in 1988 and then again six years later to BMW. There were hopes that production may take off for the UK however a few months later, car equipment was transferred to China. This looked like the end of volume manufacturing for the UK as the events to follow after this period included the financial crisis and thus things could only get worse.

How the UK car industry has recovered

(Source: Highcharts)

However post-2011 the UK car industry seems to have recovered. A large reviver to this was the acquisition of Jaguar Land Rover bought by Tata from Ford in 2010. Tata has invested a further £10bn since that date in the UK and furthermore a further £3bn is forecasted to take place this year.

The Revival

A major component of the renaissance is associated with the depreciation of the sterling – if the UK had been in the Euro then car manufacturing would have been disastrous.

Moreover, the main factor is the fact that wealthy foreign investors have entered the UK investing in upmarket vehicles. Since 2000, the value of British cars have increased circa 30 percentage points above inflation indicating the increased quality and the increased cost of UK cars.

Furthermore, Mike Wright who is the executive director at Jaguar Land Rover states that investment is the key instrument in the revival process. The fact that Jaguar and Land Rover continued to invest even though there was a downturn incumbent reduced the impact of the downturn. This also occurred with Nissan and Honda’s investment in the UK from Japan. Also the revival can be illustrated with Rolls-Royce recently investing in its new Plant in Goodwood (West Sussex). Rolls-Royce recently stated that;

“The desire for car brands never declines – it’s just money which is needed to make them viable”

Another factor is successful government policy within Westminster. The process of designing to selling a car can take around five years and thus this is “not a short-term game”. The Automotive Council has stated that there is now a transparent relationship between the automotive industry and the government indicating that the correct government policy can be implemented at the correct time.

Finally, unions now have a “cooperative approach” rather than the “confrontational one” which existed in the past. This change in the management structure indicates that now car firms work together with policy making the execution process smoother. This incentivises investment and thus investors are now not fearful of any hindrance in the process.

The UK car industry is definitely on the rise again. The most important factors which are leading to this consist of wealthy foreign investment in the UK, the impact of brand value, successful policy enacted by Westminster and unions changing their previous non-cooperative approach. However, the question that still remains is how long will the revival last for and what will be the new obstacles in the next decade?

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