Bulletin

Santander and EEF: Manufacturing Automotive Sector Bulletin

Car manufacturing

Manufacturing is by no means a homogenous entity: it’s made up of a host of industries ranging from the manufacture of fully commoditised products to high value-add precision instruments. Santander and EEF, the manufacturer’s organisation, have collaborated to bring you quarterly bulletins on key sectors within manufacturing. For our inaugural quarterly sector bulletin, we look at understanding the automotive industry and how the sector is positioned to deal with Brexit and non-Brexit related challenges over the next few years.

Download the full report

SECTOR OVERVIEW

The automotive sector manufactures a range of motor vehicles from cars, buses and commercial vehicles (vans, lorries etc) to snowmobiles, golf carts and caravans. This is complemented by the production of bodies for motor vehicles and their parts and accessories, such as electrical and electronic components, gearboxes, brakes and airbags.

The automotive sector primarily produces final goods and 40% of what’s made is consumed by domestic households, while another 29% travels to overseas markets.

About a quarter of output is used as an intermediate good by other industries. Intermediate consumption is the value of the goods and services consumed as inputs into production by other enterprises, rather than for final consumption; the goods or services may be either transformed or used up by the production process.

The remaining 8% is utilised as an investment by other businesses (e.g. a catering company buying a van).

 

Sector make up

The UK is the 13th largest automotive manufacturer in the world. The UK exports a larger proportion of total automotive output than key competitors further up the table of major global producers, like France, Brazil, India and Thailand, and this pushes the UK up to 9th place for exports by value.

The lion’s share of exports are cars at 81%, or £25.5 billion, with the next largest – parts of motor vehicles – a mere 13%, or £4.2 billion. Seven out of ten of the UK’s export markets are located in the EU. However, the UK’s top two export markets are the US and China. Australia wraps up the top ten in last place, taking in just over 2% of all UK automotive exports.

 

Top export products by value

AUTOMOTIVE EXPORTS

UK automotive exports have grown spectacularly since the start of the new millennium. Between 2000 and 2015, the value of total UK automotive exports has more than doubled. There has been positive growth across continents, although most of this growth has come from emerging markets. Overseas sales to Asia & Oceania have grown by a stellar 690% since 2000, overtaking America as the second largest market for UK automotive sales in 2011.

Exports to the Middle East & Africa have also increased significantly, by 504% since 2000, but it remains the smallest market at 9% of total automotive exports in 2015.

Europe is still the top destination for automotive exports at 50% of all international sales, and growth since 2000 has been solid at 40%.

 

Top 10 high growth markets

 

SECTOR PERFORMANCE

The automotive industry has been one of the best performing sectors in UK manufacturing. Output has grown by a total of 31% since 1990, the fourth highest in manufacturing after other transport, pharmaceuticals and chemicals.

Between 2010 and 2015, automotive output increased at the fastest pace of any manufacturing sector at 48%, fully offsetting the large decline during the financial crisis, where output fell by 29% from 2008 to 2009. The hefty drop during the recession was the result of a change in consumer spending patterns, with the deterioration in household disposable incomes weighing heavily on demand for big-ticket durable items like motor vehicles. However, consumer spending has more than recovered since 2010 both domestically and internationally, with household consumption in the UK growing by an annual average of 1.1% since 2010.

The uptick in demand has been met with some significant R&D spending and productivity improvements by UK manufacturers. Strong growth in automotive output over the past five years has been driven by the introduction of new models from a range of OEMs with a manufacturing base in the UK. As a result, the share of automotive output in total UK manufacturing has increased to 8.2% in 2015 from 6.4% in 1990 and it is now the third largest manufacturing sector.

For the full story, download the full report.

 

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