Currently reading: Analysis: 'British' cars matter more than ever for the UK post-Brexit
To be deemed British, a car must have a reach certain value level of British parts - if doesn't, and it isn't, it could be subject to EU tariffs
Autocar
News
6 mins read
19 November 2020

Just how British is the UK car industry? That question is crucial as we leave the European Union (EU) and set up our own trade deals globally, because every country will ask the same thing: exactly what makes that Land Rover, Nissan or Mini British?

First off, this isn’t a question of ownership. The fact that the owner of Jaguar Land Rover (JLR), Tata, is Indian or Toyota is Japanese makes not a jot of difference to whether the cars they make in the UK should be regarded as British or not.

No, the question is more fundamental: how much of a car’s value in terms of its parts content is British, rather than imported from abroad?

This is key not just to whether countries will allow tariff-free imports of that car (under so-called rules of origin) but also, much more importantly, it’s key to the health of the British automotive industry as we begin life outside the EU.

The more British our cars, the easier their entry into other countries and the more investment and revenue is generated here. Each car contains around 30,000 pieces; the greater proportion of those pieces that are made here, the healthier our industry.

So, how British are our cars? We approached all of the major companies that build cars in the UK and… none would tell us. But there are other ways of finding out. The Society of Motor Manufacturers (SMMT) and Traders circulated a figure in 2017 that, on average, 44% of a UK-built car was British. It quoted the same figure today, and that sounds pretty good.

After all, JLR, Nissan, Honda, Toyota and BMW – the top five car makers operating in the UK – build engines here as well. Add up the parts sourced from our 2400 component suppliers and you have a pretty healthy figure, if nothing like the 80-90% British content figure that the industry was hitting back in the 1970s.

However, that doesn’t tell the whole story. The 44% figure quoted by the SMMT assumed that every British-sourced part that went into the car was itself 100% British. But the parts suppliers are like the car makers in this global industry: they source bits from everywhere.

So, what’s the true figure? That question was put to SMMT boss Mike Hawes at a 2017 parliamentary committee meeting that was tasked with understanding the impact on the car industry of our leaving the EU. “Somewhere between 20% and 25%,” he answered.

Hawes pointed out this was a long way from the 55-60% local content threshold that most countries require under rules of origin. That means UK-built cars could be disqualified from tariff-free entry by any countries the UK is now signing free-trade deals with. They will ask: ‘if your British car is really only a quarter British, who exactly is this deal helping?’.

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However, that 20-25% figure probably isn’t correct either, because it doesn’t take manufacturing into account.

“All the value the UK vehicle makers put in themselves to turn a bag of parts into a vehicle is quite considerable,” said Phil Davies, a consultant and former automotive industry analyst for the government.

How much value we add to imported raw materials and parts may be up for debate, but it’s clear that the value it brings to our economy is huge.

For example, JLR spent £3.3 billion on investment in 12 months to the end of March 2020, of which £1.8bn was on research and development. It also spent £2.6bn on salaries for its 36,531 workers. JLR is a global company now, with manufacturing facilities in China and Slovakia, but much of that money goes to the UK. In its most recent company report, JLR declared that £12.0bn of its £13.6bn assets globally were situated here.

Of the 1.3 million cars the UK made last year, 81% were exported, earning the country £42.4bn – equal to 13% of the UK’s total exported goods. The automotive business indirectly employs 864,300 and helps pay the pensions of many more.

Agreeing a deal with the EU is crucial, because it’s likely to agree that EU parts can be counted as UK parts. Given that 81% of all automotive parts coming into the UK are imported from the EU, this would mean that most car makers could easily hit the threshold to qualify for tariff-free car entry into the EU. It gets trickier when it includes batteries, however.

What we don’t know is how the UK automotive industry will be affected. That 1.3 million total built last year is a long way off the 1.9 million record set in 1972 and a steep decline from previous years. And Honda will leave Swindon next year, wiping off another 100,000.

Prior to the Brexit vote, Davies helped the government to devise a plan to entice firms to fill the gaps left by the UK’s decline in industrialisation.

Brexit won’t necessarily scupper that, Davies said, but our dwindling manufacturing numbers will scare suppliers.

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“Our target was that by 2020 we would be producing about two million vehicles [per year], but actually we will just do under a million this year,” said Davies.

“We have a business-friendly environment, but it’s all about volume and whether there’s enough demand in the UK for a global supplier to put their forging facility or alloy wheel facility in the UK.”

The lack of a UK electronics supply is a big concern. “As the vehicles get more high-tech and advanced, the likelihood is that UK content will decline further,” said another analyst, who asked to stay anonymous.

If the UK were to declare which of its car makers were more British in terms of content, low-volume luxury brands would probably have the greatest claim.

Bentley reckons that it has the most British content of any car maker, despite its bodies coming from Germany. The sheer number of hours adding value to a sheet of wood to turn it into a polished veneer, for example, all adds to a car’s Britishness.

But that Britishness is mostly valued outside Britain. Last year, 89% of the cars bought in this country were imported – a new record. So if we want our car industry to remain healthy, it’s crucial that we have the best possible trading relationships with our main customers.

Why Britain needs its own car batteries

The UK desperately wants batteries to be included as UK content as part of any trade deal with the EU, and it’s easy to see why. The batteries in hybrid and electric cars form such a huge part of their cost that much of the value of cars built here could suddenly be marked as Chinese or Korean. We want leniency while we rush to gain our own supply.

However, because we will never match China on the price of existing lithium ion formulations, we’re kidding ourselves if we think we will persuade a car maker like Jaguar Land Rover to buy a more expensive battery that uses the same chemistry.

“The challenge the UK has got is that the existing formulations are being knocked out of China at a very low price, so we’ve got to come up with new formulations and develop them,” said Colin Herron, who directs consultantcy Zero Carbon Future and, while at Nissan, set up the battery facility in Sunderland (now Chinese-owned, ironically).

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We can import the raw materials and add enough value that the batteries will be seen as British. It’s easy to imagine; we invented lithium ion batteries, after all.

Herron likens the race to develop new and improved lithium ion formulations to the one to create a Covid-19 vaccine. Then it’s a long four-year slog to develop it for automotive use.

The government needs to steer the direction of travel for batteries post-Brexit to help make it happen. “We lost control of making cars, trains, aeroplanes and motorbikes,” said Herron. “What do we want to do as a nation? Do we want to be generators of brilliant stuff then lose interest in it? Or do we want to do what Germany and Italy are doing: develop new things, be recognised for it and create wealth from it?”

Top UK-built cars in 2019

Nissan Qashqai, 257,851

Mini Hatchback, 178,657

Toyota Corolla, 148,106

Honda Civic, 108,876

Range Rover Sport, 77,665

Top UK car makers in 2019

Jaguar Land Rover, 385,197

Nissan, 346,535

Mini, 221,928

Toyota, 148,106

Honda, 108,876

Nick Gibbs

READ MORE

Car makers risk losing out in 'zero-tariff' Brexit trade deal 

Nissan and Toyota to seek compensation from UK in no-deal Brexit 

EU automotive bodies call for urgent post-Brexit trade deal

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NavalReserve 19 November 2020
@si73

Nissan Leaf batteries are made in Japan and shipped to the UK.

So much for a UK battery manufacturing capability.

Harry P 19 November 2020

Home grown engineers

Has everyone overlooked LEVC in Coventry? They may be Chinese owned, but they are producing EV/Hybrid vehicles here in the UK. I do however agree that we need to recreate a manufacturing industry here in the UK. The fact that electronics and electrical engineering has disappeared from most school syllabuses is a major concern. Where are our future electrical engineers going to come from?

jagdavey 19 November 2020

The future of British manufacturing is German!!!!

PSA will close Ellsmere Port & sift all Astra production to Rüsselsheim. Bentley is to be put under the control of Audi & the next gen. Electric SUV's from Audi, Bently & Porsche will be built by Audi in Ingolstadt. BMW has said that the next Mini Countryman will be built in Leipzig. Toyota will relocate UK production to Turkey if there's a bad Brexit deal. Tesla is building a MegaFactory in Berlin to supply the whole of Europe. VW & BMW has retooled it's German plants to produce EV's.The Jaguar I-Pace is made in Austria.

So if we are going all Electric by 2030, where is the British Electric Vehicle manufacturing?? Boris has been caught napping again. Surely before you announce that ICS's will be banned in a decade you should encourage EV's to be built domestically?

si73 19 November 2020

jagdavey wrote:

jagdavey wrote:

PSA will close Ellsmere Port & sift all Astra production to Rüsselsheim. Bentley is to be put under the control of Audi & the next gen. Electric SUV's from Audi, Bently & Porsche will be built by Audi in Ingolstadt. BMW has said that the next Mini Countryman will be built in Leipzig. Toyota will relocate UK production to Turkey if there's a bad Brexit deal. Tesla is building a MegaFactory in Berlin to supply the whole of Europe. VW & BMW has retooled it's German plants to produce EV's.The Jaguar I-Pace is made in Austria.

So if we are going all Electric by 2030, where is the British Electric Vehicle manufacturing?? Boris has been caught napping again. Surely before you announce that ICS's will be banned in a decade you should encourage EV's to be built domestically?

Isn't Nissan's leaf still built in Sunderland? So there is a semi affordable UK built EV, as for Toyota moving production, we don't and won't know if that's likely for a while yet and as yet they don't produce an EV.

yvesferrer 20 November 2020

My old mates in the N-E tell me that rumours are rife at the Sunderland plant: closure is dependent on the outcome of the current negotiations with the EU.

Even allowing for the usual fear-mongering and the weeping Jeremiahs, there exists a real anxiety among the workforce at present.

It would be nice to think that gems like Bentley can restore the balance of payments but in truth, they are a drop in the ocean AND that minuscule production can be shifted at the whim of a Board meeting and a shareholders' vote!

BoJo might indeed have shot himself in the foot here... Time will tell but mortgages have be paid still.

Gerhard 20 November 2020
jagdavey wrote:

PSA will close Ellsmere Port & sift all Astra production to Rüsselsheim. Bentley is to be put under the control of Audi & the next gen. Electric SUV's from Audi, Bently & Porsche will be built by Audi in Ingolstadt. BMW has said that the next Mini Countryman will be built in Leipzig. Toyota will relocate UK production to Turkey if there's a bad Brexit deal. Tesla is building a MegaFactory in Berlin to supply the whole of Europe. VW & BMW has retooled it's German plants to produce EV's.The Jaguar I-Pace is made in Austria.

So if we are going all Electric by 2030, where is the British Electric Vehicle manufacturing?? Boris has been caught napping again. Surely before you announce that ICS's will be banned in a decade you should encourage EV's to be built domestically?

 

It is not accurate to claim the future of British manufacturing is German. Turkey is not in Germany, neither is Austria, and no Countryman has been built in the UK since the original 1960's version... Small-scale manufacturers like Bentley are not critical to UK manufacturing as they are largely assembly plants, and the assembly isn't likely to move to Germany for all Bentleys. As for Tesla, production will still come largely from the USA or China, and let's not forget that nearly half of German cars in the UK are produced outside of Germany, like Hungary, Slovakia, South Africa, USA and the UK... As for Ellsemere port and Vauxhall Astra, that's a French-owned company so it's just as likely to move to France, Czech republic or Netherlands if anywhere as GG is at capacity.

I trust this puts some balance into your over-emotional comment.

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