Automakers in the UK Are Not Amused

Laying off workers and closing plants as exports and production plunge — Jaguar Land Rover is the biggie. 

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

Car production in the UK slumped by 18.2% in January compared to January 2018, after it had already plunged 19.6% in November and 22.4% in December, as a result of sharply declining demand in key export markets such as Europe and China.

January was the eighth consecutive month of declining car production in the UK, according to the industry group, the Society of Motor Manufacturers and Traders (SMMT). In 2018 as a whole, production fell 9.1% to 1.52 million units, a five-year low for the sector. The chart (courtesy of SMMT) depicts rolling-12-month car production totals:

Rolling-year total production hit a post-crisis peak of around 1.75 million units in mid-2016, just after the Brexit referendum. Since then, rolling year totals have fallen 12% to 1.49 million last month, down by over 250,000 units from the 2016 high. “Regulatory changes and ongoing uncertainty over future diesel policy and taxation were exacerbated by declining consumer and business confidence,” the SMMT said.

The manufacturers most severely impacted, in terms of their production declines in 2018 compared to 2017, were:

  • Jaguar Land Rover, UK’s largest car manufacturer: -15.7%
  • Vauxhall: -15.8%
  • Nissan: -10.7%
  • Toyota: -10.4%.

Just over one in five of the 127,649 cars that came off the production line this January went to the home market, 4.8% fewer than last year. But it was in the export market, accounting for nearly four out of five cars produced in the UK, where the biggest decline was registered. Exports dropped 21% in January, from 119,000 to 97,000, the seventh monthly fall in a row. As SMMT reports, weakening demand in key Asian and European markets drove much of the decline, with exports to the EU27 countries down by 20%, and with exports to China collapsing by 72%.

“The industry faces myriad challenges, from falling demand in key markets, to escalating global trade tensions and the need to stay at the forefront of future technology,” said SMMT Chief Executive Mike Hawes. “But, the clear and present danger remains the threat of a ‘no deal’ Brexit, which is monopolizing time and resources, undermining competitiveness.”

Against this backdrop of heightened uncertainty, fresh inward investment in the sector plunged in 2018 to just £589 million – down by 46.5% from 2017. Three quarters of UK automotive businesses say they fear a “no-deal” Brexit will threaten their future viability, according to a new member survey conducted by SMMT. Half of the respondents say they have already been hit by uncertainty, with one in five having lost business and a third cancelling or postponing UK investment decisions.

Automakers and their suppliers in Europe rely on “just-in-time” and “just-in-sequence” delivery and production systems. A disorderly Brexit has the potential to hugely disrupt these processes. If there has to be a Brexit, car manufacturers would much rather it were based on a withdrawal agreement “that offers breathing space to negotiate ambitious future relationship and frictionless trade,” according to SMMT. In the current state of play, the chances of that happening are wafer slim.

To compound matters, these final nail-biting stages of the two-year withdrawal negotiations are coinciding with the onset of a global manufacturing slowdown that has already hit the economies of China, Japan, Germany, Italy, Spain and the U.S. It’s hardly any surprise, therefore, that the bad omens are coming increasingly thick and fast for the UK’s car sector:

  • In January, Jaguar Land Rover announced plans to cut 4,500 jobs citing the declining popularity of diesel engines and a slump in sales in China.
  • In early February Ford announced 400 job losses at its Bridgend engine parts site. Ford, which employs around 13,000 people in the UK, also warned that it will not hesitate to shift production out of the UK in the event of a disorderly Brexit. “We will take whatever action is necessary to preserve the competitiveness of our European business,” it said.
  • Nissan has also warned it is reconsidering an earlier commitment to build its X-Trail SUV in Sunderland.
  • On February 19, Honda unveiled plans to shut its Swindon manufacturing plant by 2021 after operating for almost 30 years in the UK, resulting in the direct loss of 3,500 jobs and thousands more in the broader supply chain. The company insists the decision is not related to Brexit but is a product of global changes in the industry.
  • UK engine manufacturing was also down in January, by 9.5%, with 241,700 units built, compared to 267,000 units during the same month of 2018.

It’s not all doom and gloom, of course. For example, Jaguar Land Rover recently said that despite all its recent travails, it is preparing to make a major investment in advanced manufacturing in the UK, though nothing concrete has yet been announced.

There was also a 49% year-on-year surge in production of commercial vehicles this January after demand from overseas rose 25% and from the UK 97%. That came on the heels of 8.5% growth in 2018. Granted, that was preceded by two years of decline. And, of course, the UK’s output of commercial vehicles (9,182 units in January) is small relative to its car output (120,649 units in the same month). But right now, the UK’s automotive industry — like many other national automotive industries — must take its silver linings where it can find them.  By Don Quijones.

Investors (perhaps led by well-connected ones) started smelling a rat 10 months before the first disclosure. Read…  Balance Sheet “Error” Wreaks Havoc on UK’s Fastest Growing, Most Popular Bank

Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate “beer money.” I appreciate it immensely. Click on the beer mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

 

  55 comments for “Automakers in the UK Are Not Amused

  1. J.M.Keynes
    Mar 2, 2019 at 12:44 pm

    – “preparing to make a major investment in advanced manufacturing ” ???? Does this mean that Jaguar Land Rover will produce the same amount of cars but will employ fewer workers ? I fear it will. But this also means lower total income and lower total (consumer) demand.

  2. Willy2
    Mar 2, 2019 at 1:27 pm

    – Falling sales and falling exports ? In spite of the weakening britsh pound sterling ?

  3. SocalJim
    Mar 2, 2019 at 1:58 pm

    In the US market, the Toyota Rav4 sales reported Friday concerns me. For 2019, is a complete redesigned, and it is beautiful, but sales fell. That is a red flag. Hopefully, just a one month fluke because that one should sell well if the US economy is doing as well as advertised.

    • jsm976
      Mar 3, 2019 at 12:12 pm

      Toyota has not made a beautiful car for decades. Save for maybe the FJ, but obviously that’s al subjective.

    • Juanfo
      Mar 4, 2019 at 3:39 pm

      It is a lot bigger and more expensive than the previous model. It is not a 1st gen Rav4 anymore.

  4. njbr
    Mar 2, 2019 at 3:05 pm

    With 25 million personal vehicles manufactured in China in 2018 it is clear that China has built capacity to supply its own market with quantity and quality levels matching imports from places like UK and US.

    (About 11 million built in the US last year)

    Do you think that we, alone, espouse the equivalent of “buy American”?

    Should they save foreign manufacturers at the expense of their industry?

    These are not rice farmers with funny conical hats. They are serious about their own industrial and technical future. and see themselves as becoming the premier supplier of desirable consumer goods (jaguar/land rover be damned).

    • pmr
      Mar 3, 2019 at 7:54 pm

      Agreed.

      They’ve also started to export, it must concern the likes of Toyota & Honda.

  5. Howard Fritz
    Mar 2, 2019 at 3:12 pm

    If anything I’m surprised at how long the UK has been a top manufacturer of vehicles. It’s well known in the automotive community that the first thing you do when you purchase a Jaguar is you take it apart and put it back together properly. :-]

    • Anthony Aluknavich
      Mar 2, 2019 at 7:29 pm

      A while back, you would yank the Jag engine and replace it with a GM V8.

      • Mike G
        Mar 2, 2019 at 8:17 pm

        I know someone who drove their new XJ-6 from the dealer straight to a mechanic to replace the engine with a Ford 350.

        • Laughing Eagle
          Mar 3, 2019 at 2:26 pm

          I know a friend who had a XJ-6. Only problem he had was the engine shut down to idle because the many backup systems, one being if the tranny over heated, it would not allow him full throttle.

      • nick kelly
        Mar 2, 2019 at 9:04 pm

        The 4 6 8 or maybe the Cadillac diesel?

        • Bet
          Mar 3, 2019 at 6:50 am

          Had an xk140 years ago as a restoration project. The plan was to put in a Chevy block. Ultimately we ran short of dough and that gorgeous car to be was shipped to England for parts 😭

        • Blutoff
          Mar 3, 2019 at 1:03 pm

          A 4 cylinder deisel would make that sleek, sexy Shaguar even sexier!

        • nick kelly
          Mar 3, 2019 at 7:38 pm

          The XK 140 was not intended as a grocery getter. It was a poor man’s Ferrari intended to complete at Le Mans.
          After winning there (with I believe the 150?) three years in a row Jag retired from racing.

          BTW: it would not have had competitive handling with a US V 8. The US has by far the lowest standards in handling but they have improved.

          Popular Mechanics, usually Detroit friendly, tested the Lincoln Town Car in 1987 and found that: ‘even our professional drivers could not keep it in straight line.’

          When Ford bet the company on Taurus it tapped its overseas engineers for improved handling. It marketed the car with Jackie Stuart asking: ‘Have you driven a Ford lately’?

  6. Realist
    Mar 2, 2019 at 3:19 pm

    Regarding Britain, it would be interesting to see the numbers for the domestic veichle market. Is it slumping, which segments of the domestic market are doing better or worse than the domestic market as such.What is happening on the British market for used veichles ? Are the sheriffs acting repo men etc ?

    • Bankers
      Mar 2, 2019 at 4:55 pm

      This has main global sales figures for 2018, with UK -6%, global sales -0.5%

      http://carsalesbase.com/global-car-sales-2018/

      • Realist
        Mar 3, 2019 at 5:13 am

        Thank you Wolf.

        Ugly numbers indeed. I understand very well why small cars are popular in the UK, to drive a typical US veichle in Britain ( and elsewhere in Europe ) would often be a pain somewhere where the sun seldom shines due to the size of the veichle and roads, streets and parking that aren’t dimensioned for veichles of that size. In addition, it isn’t too fun to be driving a fuel guzzler in a country with expensive fuel.

        I wonder, the auto sales slump being more or less global, is it due to Joe Sixpack being maxed out, does Joe S fear for his job thus putting of reneval of his car or are people waiting to see what kind of propulsion will be be the smart choise for the next 5-10 years ? Or is it all of the above plus other factors involved ?

  7. John
    Mar 2, 2019 at 3:49 pm

    For those who need more information Google ‘diselgate’ and the EU’s proposed diesel ban.
    This is self inflicted, by so called ‘representative democracy’ politicians.
    Crony capitalism has protected VW and the EU also signed a zero % tariff agreement for vehicles with Japan
    Anyone surprised Japan is going home?
    We have been let down

  8. Bobber
    Mar 2, 2019 at 5:28 pm

    This is good. We need less vehicles and the road and more use of mass transit and leg power, which has healthy side benefits. Why does anybody in a city need a Range Rover? If anything, they should be rented only when their use becomes necessary. For 95% of travel, better options prevail. If you want to show off wealth, make a suit out of some bank statements or simply say “Hello I’m John. I make 500,000 pounds per year”.

    • 2banana
      Mar 2, 2019 at 5:50 pm

      Comrade,

      You are correct. And really, who needs more than one bathroom in a house? Actually, there should be no houses as they are a yuge waste of resources. A nice government provided 1 bedroom flat is all you need. Maybe a 2 bed flat if you have more than four kids.

      Vacations? Waste. Waste. Waste. Just walk to the local and party provided parks.

      More than color of pants or shirts? You need only two comrade. One to wear and one that is to be cleaned. Why do want to show off your wealth???

      Internet? Dial up is fine. More than that, you are just wasting time binge watching movies like the wasteful rich.

      Forward comrade to our glorious future.

      • IdahoPotato
        Mar 3, 2019 at 2:22 am

        Actually everything you say is spot on as far as I am concerned.

        A small flat is great. Vacations are a waste if you like who you are and where you are. Two sets of clothes are all you need. This is exactly how I grew up.

        And movies on the Internet are a waste of time. I didn’t have a TV or the Internet growing up and didn’t miss either.

      • Bobber
        Mar 4, 2019 at 11:09 am

        There’s a clear separation between environmental protection and communism, unless one clings to the propaganda and fear mongering promoted by by the human industrial Gods.

        Change is good, unless you are the last one to recognize it.

    • Bankers
      Mar 2, 2019 at 5:55 pm

      These are yearly sales, but the number of cars on the road increases all the same because new sales at to existing fleet. The UK is levelling out at around 31.5 million cars on the road, train and bus costs have increased by over double that of cars over the last ten years (beeb) . Apart from that I agree with you, except that when everywhere is a highway and cities are traffic walking is no fun. We’re outnumbered :-( . For the price of a new vehicle you can buy a nice sized piece of land away from that, with house even (ok not so much in UK) , so there are choices as long as you are willing to leave some convenience and society behind, and anyway you can always…drive…to visit…. :-( :-( :-( .

    • Bobber
      Mar 2, 2019 at 8:09 pm

      I didn’t mean to minimize the impact of job losses. Hopefully people are being treated well during the layoffs and they find sustainable positions elsewhere.

      • Bankers
        Mar 2, 2019 at 11:04 pm

        No, it is more important than that for the future. In the developed countries there are around 7 vehicles per 10 people. We are used to everything working by use of own vehicles, it’s how cities are designed, how people plan their work and daily means. It seems to make sense to continue that way, a lot of energy and labour is poured into improving the products and there seem to be no limits to that but eventual market saturation and even then. I’m looking at a table for rest of the world now, including China, well over half the population of the world, and they average out at maybe 1 vehicle per 10 people. The US ( 5% population of world) alone consumes over 20% of global oil production, mostly for transport. It is not possible in the long run for everyone to be like the west, and the rest of the world will compete to be like the west, which means that at some point the west will not be able to afford this level of vehicle use, simply because there are not enough energy resources to support say twice the current global fleet of vehicles at current usage levels. EV is a fraction of the solution, for the rest we will see. So no matter what anyone’s opinion is, ICE vehicle production has its limits of possible global demand, EVs also as they still also consume energy for production and use. Overproduction of oversized vehicles just is not very clever when viewed this way, it is wasteful and encourages a national policy of domination of global resources that cannot be won by example, and will eventually fail due to the dependency created. In the meantime well I guess everyone gets to think they got it all made.

      • yngso
        Mar 3, 2019 at 5:28 am

        No they don’t because carmageddon is only a part of the economy going down.

  9. andy
    Mar 2, 2019 at 6:08 pm

    We? Speak for yourself. Better yet move to some social paradise and learn something from experience for a change.

    • Bankers
      Mar 2, 2019 at 6:49 pm

      You speaking to me andy? I’ve lived in a lot of places in a lot of countries, under a lot of completely different circumstance, which one do you want to compare to ? Trekking way away or shopping for several people on bike at 5 miles of 40° slope for years. Going downhill is the easy part ;-) . Just average towns that are quiet and pleasant to walk through would be good enough for most people I think, the trouble is it’s compact verticle density or a lot of often unfriendly sprawl nowadays. Going that way around the world… people might leave a few places more or less as they once were you’d think?

      • Bankers
        Mar 2, 2019 at 7:19 pm

        …ok… one mile was extremely high gradient and the 40° degrees are probably out now I picture it , the rest of the path something slightly less. I took another (very fit) cyclist up the route (without rucksack) and he got half way… and started puking. You get the idea. It’s fun and I really could not much care what people who insist on driving everywhere think, the most they do is shift their foot a centimeter or two.

      • Bobber
        Mar 2, 2019 at 8:14 pm

        Curious how do you control speed going down hill with all the weight. Do you have a bike with disc brakes that require new pads all the time?

        • Bankers
          Mar 2, 2019 at 8:42 pm

          The weight was uphill ( town was downhill ) going down the steep you have to keep the speed way down the whole way as you would otherwise not stop , I took that very very slow and with careful shared use of front brake … but no disc brakes and had not ever trouble. I’m not a pro cyclist, though I know some, you just learn and get fit to the circumstance. When I started I was walking the steeper sections. That is why I don’t know grades and angles as well, even from trekking, I never calculate that way just go by eye and own state and use caution. So the gradient I am talking of looks like

          https://m.youtube.com/watch?v=TpeIVUlUwaw

          which you might guess at 45° from some of the shots but is 30%, which I think is half that. I don’t need to brag because I have nothing to prove here, it just irks me that when you talk of different less fast or maybe less convenient ways of doing things people straight off put you as dreamer. Have trekked the himalayas by horse, and jumped trains across europe without a penny and living on the street, nor one or the other was “greater”, it is all experience.

  10. Rowen
    Mar 2, 2019 at 6:19 pm

    Range Rovers can count on Prince Philip for about 10 units per year…

    • Mike G
      Mar 2, 2019 at 8:20 pm

      “The Duke of Hazard”

    • yngso
      Mar 3, 2019 at 5:37 am

      Jag and Landie are some of the most useless vehicles ever made. Nobody needs them. People get tired of wasting money eventually…

    • California Bob
      Mar 3, 2019 at 2:36 pm

      “Range Rovers can count on Prince Philip for about 10 units per year…”

      Not any more:

      https://www.cnn.com/2019/02/09/uk/prince-philip-driving-gbr-intl/index.html

  11. Hoover
    Mar 2, 2019 at 7:00 pm

    I love watching the English point a gun at their own feet, all to save a mediocre PM’s political career. I can only hope May is so incompetent as to pull the trigger.

    So, having control of the spies and having the modern version of J. Edgar Hoover’s file cabinet can make on the PM, but it can’t make one a good politician or a good negotiator. That’s the problem when who’s got blackmail on everyone else becomes the way nation’s pick their leadership. Lot more of that to come in this age of surveillance, blackmail and politics by scandal.

    • Debt Wazoo
      Mar 2, 2019 at 11:35 pm

      You have my vote, sir.

  12. IronForge
    Mar 2, 2019 at 7:47 pm

    GBRExit Conditions need to Pan Out. How will this change affect exports to CHN and IND?

  13. Escher
    Mar 2, 2019 at 9:16 pm

    Dyson is also planning to produce its electric cars in Singapore. Only R&D in the UK.

    • California Bob
      Mar 3, 2019 at 7:28 pm

      “Dyson is also planning to produce its electric cars in Singapore. Only R&D in the UK.”

      I suspect that was inevitable, Brexit or not. Brexit makes a good excuse.

  14. ML
    Mar 3, 2019 at 3:54 am

    I feel this is my Civic duty to tell you this. Honda are not leaving the UK because of Brexit but of their own Accord.

  15. Kenny Logoffs
    Mar 3, 2019 at 7:47 am

    And in the UK, the latest ‘envy’ tax on cars with an official list price over £40,000, get about £1,800-£2,000 extra in tax over 6yrs.

    That’ll probably hit all JLR sales. It’ll hit used values of the cars (17 onwards) until they’re 6yrs old and the annual ‘premium’ tax is ended.
    The value and demand of the cars exposed to this tax will certainly be negatively impacted for another few years.

    The demand issues are one thing, then shooting the consumers with more tax, while they also likely lose their jobs due to automation.

    Perhaps the last 5-10 years of car market boom has been the China market, which is now increasingly domestically satisfying itself.

    All that over-expansion of Western manufacturers will have to contract in the face of China doing its own thing.

    Plus I’m certain Western manufacturers biasing their designs for Chinese tastes impacts domestic appeal.
    BMWs X7 and 7 look like examples of that to me.

    Once the supercar manufactures in China really get going, expect to see the rest of the UK specialist manufacturers going south too, as much of the past decade of growth and expansion by them was to fill the Chinese market.

  16. Blutoff
    Mar 3, 2019 at 12:59 pm

    Doesn’t it ever happen that the market is simply saturated, demand is down and auto companies have to layoff workers?
    People are in debt to their eyeballs. Maybe the downturn is as simple as they’re tired of making huge mothly payments for credit card interest, that 4K-60″ TV, endless medical care, the Bass o’Matic blender that will make you lose weight and cut your chances of a cardiac event and the orbital exercise machine [$5,000] that will make you live forever.

  17. Cashboy
    Mar 3, 2019 at 5:32 pm

    Brexit has very little to do with the decline in manufacturers closing in the UK.
    The EC signed an agreement with Japan for Zero import taxes. This means that the Japanese manufacturers now have no need to manufacture in Europe and can manufacture back home.
    Jaguar has a new factory in Czech having got a massive subsidy from the EC.
    Vauxhall (General Motors) has been taken over by Renault.
    China has reduced its desire for western branded cars and if there is a demand for them, manufacturers set up production lines there.
    Joe Public is unable to get credit for motor cars so easily and the interest rate has gone up. Monthly lease payments are going up as finance companies relaise the vehicles are not reaching their estimated residual value.
    Joe Public and Companies are not committing to new vehicles because they don’t know what is happening with regard to diesel vehicles and EVs.

  18. Johnny Rotten was so right
    Mar 4, 2019 at 1:54 am

    Brexit – not just a symptom of bad teeth – just really bad business LOL. If anyone needs an explanation of Brexit as the largest most idiotic business deal ever – please return your MBA and or other biz degree to your college. This is utterly pure hilarity overall. Sad but still insanely funny and utterly preventable all this economic damage is.

    As I read earlier in the year – Brexit does not matter as the UK certainly does not anymore. Its a tiny impact-less operation.

    • Cashboy
      Mar 5, 2019 at 1:07 am

      Johny Rotten,

      Life is not only about business.
      The UK is the second largest contributor to the EC so not impact-less.

      I gather you are being sarcastic or you would be ignorant?

      • Johnny Rotten was so right
        Mar 5, 2019 at 6:26 am

        Oh dear Cash,

        Actively leaving a market where more than 50% of your exports go is utterly silly. Yes do make some sense of this, as many wealthy owners and CEO’s now call for a second referendum. Ok now that we are utterly clear – take a look in the mirror for said ignorance. Ta ta !

        • Mar 5, 2019 at 9:40 am

          Cashboy and Johnny Rotten was so right,

          Please don’t call each other “ignorant” here. Against the guidelines (#6). Thanks.

  19. AndyK
    Mar 4, 2019 at 4:36 am

    It may be a factor specific to the British car market but today’s younger generation (18-30y.o) don’t seem to regard car ownership as a necessity. They have grown up with parents generally willing to act as chauffeurs; car insurance premiums for this age group have become horrendously expensive, sometimes exceeding the actual value of the vehicle; then there is the accumulation of student debt-loads during college years, putting car affordability out of reach for many. This age-group also tend to be more savvy about products like Uber and Lyft, again lessening the imperative to buy one’s own car.

    A far cry from my own growing-up, when obtaining a driving licence and first car was almost a rite of passage. I suppose it also helped that cars were much easier to service and repair in a DIY basis. Looking into the engine bay of a modern car is looking into a different world, “Where are the spark plugs? Where’s the air intake?” or (heavens!) “Where’s the carb?”

    • nick kelly
      Mar 4, 2019 at 9:47 pm

      My nephew 34, elec engineer and millionaire at 30 (stock options in his co)
      just got his first car .

      Didn’t know what carb was. Of course his car is injected but he just got a sailboat with an outboard with carb.

      Here was my (lubricated) explanation of carb (Bernoulli) principal.

      Imagine you are sipping a beer with your lips not quite touching. If you inhale fast enough a spray or mist will be pulled from the surface because of reduced pressure over fluid surface.

  20. Erle
    Mar 5, 2019 at 2:55 pm

    Jaguar should build kit car E-types with the ragtop and all of the original look bodywork. They could include all of the stuff from a 1963, except carbs- go with FI, and modern brakes.
    I’d bet that they could sell many thousands of them.

Comments are closed.