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History of the UK automotive industry
~1897
1975
2000+
2015
2016
1959
1970s
1970s and 1980s
1950s
First all-British car
The nationalisation of British Leyland (Britain’s largest automaker) fails, and large British brands that survive — notably Jaguar and Land Rover — are sold to foreign buyers
The UK automotive industry is strong, with manufacturing facilities for cars sold internationally; this strength is evident in Nissan’s Sunderland factory, which alone produces over half a million cars at Europe-leading productivity levels
The automotive industry accounts for about 4 percent of the UK’s GDP, employing nearly 800,000 people from the country’s total workforce of just over 31 million
More than 70 percent of all Formula 1 teams have based themselves in a small area of England dubbed ‘Motorsport Valley’
British automotive icon the Mini is unveiled to the world; new models of the classic would still be in production more than 50 years later
The UK has slipped to become the sixth-largest automotive manufacturer globally
Nearly 2 million vehicles roll off British production lines every year, making the sector a significant economic contributor; British Leyland alone employs around 200,000 people, about 0.8 percent of the total UK labour force
UK companies find themselves competing with more efficient, more advanced, and cheaper Japanese manufacturers
UK industry struggles to remain competitive in the face of near constant labour disputesThe UK, at the technical forefront of the industry, is the
second-largest automotive manufacturer in the world. In the Jaguar XK120 and Vincent Black Shadow, it makes the fastest cars and motorbikes the world has ever seen
800,0004% UK GDP
6.
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UK Automotive Industry − good progress, but a challenging road aheadThis year, UK automotive industry health is, according to our new measure, at its highest ever, having enjoyed sustained improvement for several years. Sales and production are at record levels, and since 1980 market capitalisation has grown by more than 1,000 percent in real terms. Thus, the industry enters the turbulent times of Brexit from a position of strength, but also shows how much it could lose if industry footprint is reconsidered. We at Strategy&, PwC’s strategy consulting business, have created this AutoIndex to provide a comprehensive view of the health of the UK automotive sector. We looked at (1) the total value
of the UK production of suppliers and original equipment manufacturers (OEMs), (2) the total value of sales, and (3) the valuation of automotive companies listed on the London Stock Exchange. This is detailed further in the ‘Challenge and Change’ section of this AutoIndex. Together, these three measures provide a comprehensive and balanced index of the sector in totality. All three elements in our AutoIndex have grown in recent quarters. A significant amount of growth came from an increase in market capitalisation, which has risen by 281 percent in real terms since 2009.
Exhibit 1Aggregate UK AutoIndex (2009/12 = 100)
59
44
80
105
88
105 100 106
117 121 123 124 125 128 132141 145144142
19 20 17 22 21 20 27 29 31 32 32 34 37 39 43 45 44 23
4
27
32 44
32 42 41 45
46 46 46 45 46 46 46 51 48 49 51
17
21
28
40
39
42 38 41 44 45 46 46 47 48 49
50 50 51 51
11
1980 1990 2000 2008 2009 2010 2011 2012 2013 Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
+61.8% +21.5% 12.0%
Automotive market valueAutomotive productionMarket capitalisation
Note: Figures rounded, Base = 100 (average 2009-2012), rolling 12-month period Source: Strategy& analysis
Strategy& | PwC 2
Strategy& | PwC
This stock market optimism has been mirrored by automotive companies themselves; £2.5 billion of investment was committed to the UK car industry in 2015; significant investment was committed to Wales Q1 2016 (resulting in the return of car production to this region after a 43-year absence); and Nissan has recently committed to build its next generation Qashqai and X-Trail models at Britain’s biggest car plant – Sunderland. This AutoIndex represents a Q2 2016 analysis and includes an infographic on the UK automotive industry in historical context. Please read on to learn more or reach out to us if you would like to discuss the content included here.
UK automotive industry health has been steadily improving since 2011
UK automotive sales of £128 billion represent the highest level recorded, having increased in real terms by 6 percent since Q1 2015, by 78 percent since 2000, and by 200 percent since 1980.
The value of UK automotive production is also at record levels of £60 billion. This has grown in real terms by more than 50 percent since 2009, and by over 100 percent since 1980.
Market capitalisation has fallen by 15 percent since Q4 2015, but has had rapid real growth since 1990 (more than 300 percent) and 1980 (more than 1,000 percent).
Exhibit 2UK automotive market value, £bn, 2015
102 100105 102
111 114 116 117
97
1980 1990 2000 2008 2009 2010 2011 2012 2013 Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
+28.3% +11.7% +5.5%
Margin on used vehiclesTurnover for new vehicles
Pricing for maintenance and repairInterest on loans
42
3145
21
54
4136
31
72
6137
46
9
18
8
68
9
18
8
65
9
18
8
70
9
18
8
68
10
18
8
75
11
18
8
78
11
18
8
79
11
18
8
80
119
11
18
8
82
121
11
18
8
84
123
12
18
8
85
127
12
18
8
89
128
12
18
8
89
128
12
18
8
89
127
12
18
8
88
8
18
8
63
Note: Sums may not add up due to rounding — rolling 12-month period (non-consolidated) Source: Strategy& analysis
3
Strategy& | PwC
UK automotive market value has increased without interruption since 2011
This positive trajectory has been driven by the value of new vehicle sales, which are up more than 40 percent compared with 2011. This is primarily driven by volumes, which are up by 38 percent. Registrations are at record levels. Between 2011 and 2015 the price of the average new car rose approximately 3 percent in real terms. The other components of sales (repair and maintenance revenues, and the value added in finance and used vehicle sales) represent the remainder.
Exhibit 3UK automotive production value, £bn, 2015
Source: Strategy& analysis
Exhibit 4UK automotive production, thousands of vehicles
1980 1990 2000 2008 2009 2010 2011 2012 2013 Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
+54.6% +6.9% +7.3%
Vehicle production valueParts production value
60605555 545454545454
48
38
52
38
3127
50
10
50
58
10
48
57
10101098 8 8 8 7 9 9 9 9 9 9 98
474545454546454545404144
302320
31
51
Note: Sums may not add up due to rounding — rolling 12-month period (non-consolidated) Source: Strategy& analysis
1980 1990 2000 2008 2009 2010 2011 2012 2013 2014 2015
+59.6% +2.6%
1,5961,5781,5741,5561,443
1,367
1,000
1,447
1,641
1,296
924
4
Strategy& | PwC
Exhibit 5Market capitalisation of UK automotive companies (£bn, 2015 at quarter end)
Note: Sums may not add up due to rounding Source: Strategy& analysis
1980 1990 2000 2008 2009 2010 2011 2012 2013 Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
+127.6% +40.8% +13.4%
Manufacturers InsuranceRetailers
25
28
7
15
2
9
17
2
29
10
17
326
8
15
2
26
8
16
324
7
14
320
4
12
3
20
4
13
3
20
4
13
320
4
12
315
3
9
215
2
11
2
16
3
12
112
2
8
211
7
4
13
2
10
1
7
1
6
7
2
211123
UK automotive production value
UK automotive production value (vehicles and parts) has recovered from a low point in 2009, but it has seen modest growth of just over 10 percent since 2012. Nearly all of this growth has come from an increase in total vehicle production value. Since 2009, the value of vehicle production has increased by more than 60 percent. The value of components has grown by a slightly lower 50 percent.
Despite the modest growth in value, 2015 saw vehicle manufacturing reach its highest level in a decade, with nearly 1.6 million vehicles being produced. Q2 2016 production value remained at record-high levels, and in pre-Brexit forecasts,
total vehicle production was predicted to reach 2 million vehicles by 2020, fuelled by £2.5 billion of investment in 2015.
A record number of cars were exported in 2015, thanks to significant foreign demand for British-made cars. The impact of Brexit-related uncertainty (i.e., footprint decisions being made before the endgame is clear) and any potential changes in the rules governing movement of goods and people (e.g., European nationals working in the UK industry) will be key to the ability to meet these forecasts.
There has been an overall increase in the real market capitalisation of automotive companies quoted in the UK (component manufacturers,
Innovate Compete
5
Strategy& | PwC
Challenge Change
1. Total value of the UK production of suppliers and original equipment manufacturers (OEMs)
2.The total value of sales
The valuation of automotive companies listed on the London Stock Exchange
3.
Strategy& UK
AutoIndex
Strategy& UK AutoIndex
UK automotive production value 60
Vehicle production 50
Parts production 10
UK Automotive production 1,596
UK automotive market value 128
Turnover new vehicles 89
Margin used vehicles 8
Parts, maintenance, and repair
18
Value added in financing and used sales
12
Market capitalisation of activities 25
Manufacturers 2
Insurance 15
Retailers 7
Note: Arrows refer to development from Q1 to Q2, 2016 More details to be found in the accompanying exhibits
UK AutoIndex Q1-Q2 2016 145
Automotive sales 51
Automotive production 51
Market capitalisation 44
insurance companies, downstream retail companies, and breakdown companies) of 281 percent since 2009. The makeup of companies in the UK differs from that of other countries: much of the market capitalisation in the UK comes from insurance companies, whereas in Germany the majority comes from manufacturers.
In the most recent quarter examined, the values of downstream automotive retailers, insurance companies, and manufacturers have all fallen.
This first AutoIndex shows the progress that has been made by the UK automotive industry over the last 30 years.
The industry therefore confronts the challenges on Brexit from a position of relative strength. Future issues of this AutoIndex will appear every six months, together with our deep dive on one of the key issues affecting the industry. Stay tuned.
6
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Mark CouttiePartner, PwC UK+44-78-2432-8012mark.couttie @strategyand.uk.pwc.com
Rich ParkinPartner, PwC UK+44-79-0016-3731rich.parkin @strategyand.uk.pwc.com
Akshara KothariSenior Manager, PwC UK+44-79-0016-3433akshara.kothari @strategyand.uk.pwc.com
Jago McKenzieAssociate, PwC UK+44-78-0176-6291mckenzie.jago @strategyand.uk.pwc.com
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