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Automotive sector looks to collaboration
Increased collaboration makes sense in an era of tough cost pressure and it’s an idea that original equipment manufacturers (OEMs) have begun to embrace.
The latest example is the agreement between General Motors and Honda to deepen an existing partnership in the US, in the hope of cutting the cost of development spending and securing procurement savings through increased purchasing power. Other companies engaging in such alliances include Ford and Volkswagen, which have agreed a strategic alliance.
Last week also saw the announcement of a tie-up between Groupe PSA and the energy company Total’s Saft battery technology subsidiary in a joint venture to develop battery cells. Both companies share the challenge to evolve their business models in response to climate change.
Motor registrations fall
New car registrations fell 5.8% in August according to data from the Society of Motor Manufacturers and Traders (SMMT), with just 87,000 vehicles registered in what is often a quiet month for the industry. Sales to private buyers held relatively steady, but businesses purchased fewer vehicles for their fleets, with such registrations down 5.5% on the same month of 2019.
More positively, electric vehicles sold well in August, with several new models coming to market. Sales of plug-in hybrids rose 221%, though still accounted for only 1 in 30 new sales. While registrations of battery electric cars rose 78% to claim a 6.4% market share, over the year as a whole, that figure falls to 4.9%. Still, while the figure is well up on last year’s 1.1%, there is some way to go to hit the Government’s target of electric vehicles accounting for 70% of new car sales by 2030.
Separate data suggests the commercial vehicles market is also finding the going tough, with sales of light commercial vehicles down 16% in August.
‘August is traditionally a quiet month as fleets wait for the new September plate, so even small volume declines can look big in percentage terms,’ says Mike Hawes, the SMMT’s Chief Executive. ‘However, with this sector particularly sensitive to the economic outlook, which remains uncertain, we urgently need measures to restore operator confidence to invest and renew their fleets – vital for achieving the Government’s environmental and air quality goals.’
The SMMT continues to maintain a comprehensive Covid-19 Hub. A useful reference point for the sector, it includes government updates, details of business support schemes, a library of webinars and lots of other helpful information.
Elsewhere, the North East Automotive Alliance ran Automotive Export Week from 14 to 18 September. On 17 September, Santander lead market briefing webinars on China, South Korea and Japan, and the Association of Southeast Asian Nations (ASEAN) region. Look out for social media updates for #AutoExportWeek.
On 29 September, Santander will host a webinar, with the Department for International Trade, the SMMT and Acicae, the Basque Automotive Cluster, looking at Northern Spain and the Basque Country. The region is home to 50% of Spain’s automotive components companies. More details here.
Manufacturing sector news
August’s Manufacturing Purchasing Managers Index, published on 1 September, registered a figure of 55.2, indicating that manufacturing activity in the UK is rising at its fastest pace in six years. However, this was from a low base and was actually slightly lower than anticipated. The broader market context remains that job cuts are likely as the Government continues to unwind the Job Retention Scheme (JRS).
Still, new research from MakeUK does give reason to be positive. A third (31%) of manufacturers currently have no staff furloughed, its latest Manufacturing Monitor reveals, while more than half (54%) now think it will take less than 12 months to get back to normal trading conditions.
However, the research also shows that 62% of firms think the JRS should be extended for critical sub-sectors. MakeUK itself argues this is crucial to support the UK’s strategic industries, which are otherwise at risk of losing key skills and falling behind international competitors. Almost a quarter (23%) of firms disagree with the Government’s determination to close the scheme and 17% think it should be extended for all businesses. Significant numbers also say the scheme should be reintroduced in the event of another lockdown, and that we now need a new scheme to replace the JRS.
MakeUK points out that similar schemes in Belgium and Germany have already been extended, to the end of 2020 and 2021 respectively, while the Australian Government is extending its JobKeeper Payment scheme until March. In France, a new long-term short-time work scheme in specific sectors is planned for sectors where companies will suffer enduring loss of business from the pandemic.
The aerospace and automotive sectors are especially in need of an extension to the JRS, MakeUK says, given their position at the cutting edge of technology, which is likely to vital to growth in the future. The organisation points to official data showing these two industries are the UK’s largest investors in research and development, accounting for more than two-thirds of such spending. The sectors are also among the hardest hit by coronavirus, with many job losses already announced and output predicted to fall by 33% (a £4.6bn loss in value) and 14% (£1.3bn) in automotive and aerospace respectively.
Across manufacturing as a whole, meanwhile, reshoring now looks to be an increasingly important agenda item. Bloxwich-based manufacturer, Albert Jagger Engineering, is one business proving what might be possible. It has worked with catapult centre, MTC, to bring the production of almost 250,000 fastening components back to the UK, achieving savings of 20%-30% in the process. The efficiencies come from a new factory layout, the introduction of new technology, retraining and a 50% decrease in stockholding costs.
Finally, on 10 September, Santander and MakeUK published the latest manufacturing sector fact card, providing a crucial update on the importance of the industry to the UK economy. The cards include data ranging from export statistics to employment figures. We’ll look at the figures in more detail in our next briefing.
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