The Automotive Assistance Programme (AAP) was launched a little over a year ago to help mid-sized firms serving the automotive supply chain weather the economic crisis. Under the scheme, the government announced a package of measures, including loans of more than £2bn. It was summarily dismissed by the industry as being too little, too late.
Earlier this month, the government announced a further extension to its car scrappage programme, allowing manufacturers and dealers more time to prepare for, and operate, the exit phase of the scheme. Previously scheduled to complete this month, the scheme, which is jointly run by the government and car manufacturers, will continue until the end of March - or until the money runs out, whichever comes first.
The car scrappage scheme has undoubtedly been a success, as business secretary Lord Mandelson is keen to point out, protecting jobs and supporting the supply chain for car manufacture at a time when this sector needed it most, he said. But is the industry justified in its assertion that government has acted all too little and too late? And, anyway, has the government much leeway to intervene, either fiscally or politically, at a time when the industry faces such an historic downturn?
Only last month, 900 workers at Bosch's automotive generator plant in Miskin, near Cardiff, were dealt a body blow when they heard the news that the German company planned to call time on almost twenty years of manufacture at the factory. It was also a body blow to the Welsh economy, which is particularly vulnerable to a manufacturing slowdown, and it undoubtedly sent tremors throughout the UK automotive supply chain sector, which must now be wondering, “who’s next?”
While Britain is now widely thought to have come out of recession during the final quarter of last year – albeit by a gnat’s whisker - car industry analysts are very nervous about the prospects for their sector this year as stimulus schemes, like the AAP and scrappage come to an end. The fear is that sales will fall back sharply once these incentives are no longer available.
Less pessimistically, there does appear to be a little light at the end of the tunnel. The Technology Strategy Board’s focus on projects that demonstrate significant CO2 improvement, for example, has seen some notable successes of late for specialist automotive supply chain companies. Among recent award winners are a consortium led by Bladon Jets to develop a gas turbine driven generator package for next generation electric vehicles, and Zytek Automotive Technology, which received £4.5m to develop prototypes of a new all-electric urban car. A consortium led by Axeon has also received grant funding for its efforts to develop higher energy density automotive batteries.
And industry research would appear to shed a slightly warmer glow over an otherwise despondent industry. An independent study commissioned by the Society of Motor Manufacturers and Traders (SMMT) goes so far as to say there are “encouraging prospects” for the UK automotive supply chain with the majority of volume car manufacturers operating UK plants showing a strong interest in acquiring more locally-built components.
The automotive industry plays a vital role in sustaining the UK economy, turning over £51bn annually and contributing £10bn to the UK’s coffers. With over 800,000 jobs dependent on the industry, it accounts for 10% of total UK exports and invests £1bn each year in R&D. We are not talking trifles here.
The SMMT names four reasons for the optimism reflected in its recent study. These are a tactical shift to benefit from a favourable exchange rate; a desire to minimise the vulnerabilities and logistical costs associated with an extended supply chain; the attraction of the UK’s labour flexibility and positive industrial relations, and our native capabilities to develop new technology for ultra-low carbon vehicles.
While the report recognises the significant opportunities arising from the transition to a low carbon economy, it also identified some conventional technologies that manufacturers would prefer to obtain from suppliers here at home. The list is exhaustive and covers a significant portfolio of products, from basic automotive components to those of a more advanced nature such as electronic control units and safety systems.
While suggesting component manufacturers prepare now for the requirements of future model production, alongside batteries, the report highlights related components that would need to be obtained from sources close to the vehicle or battery assembly plant. Such items include wiring harnesses, electric drivetrains, gearing systems and electrical power controllers. SMMT chief executive, Paul Everitt believes the opportunities are there for the taking.
“There is genuine interest and commitment from global vehicle manufacturers in building a stronger UK-based supply chain,” he said at report launch. “The challenge is to convert this interest into firm orders. This will require a more collaborative approach between industry and government, particularly to encourage multinational tier 1 suppliers to increase investment in UK R&D and supply chain management capability. The transition to a low carbon future presents significant opportunities for growth in the automotive sector but immediate action is needed if the UK is to stake its claim and benefit in a global industry.”
The SMMT will be holding an event on February 25 to inform and discuss the opportunities for UK-based suppliers. This will also include presentations from the Automotive, Supply Chain and Technology councils, which were recently launched as part of a new strategic approach to developing and promoting UK-based manufacturing. It will be simultaneously broadcast live as a webinar. If you want to take part in this webinar, you can register here
Les Hunt
Editor