Currently reading: Inside the industry: The terrible truth about car factories
Car manufacturing provides 3.5 million jobs across Europe, but even in non-Covid times, there are too many factories for the number of customers
Jim Holder
News
2 mins read
19 October 2020

Automotive manufacturing doesn’t often get the headlines, but the sheer scale of it, and the economies it drives globally, explains why affected governments tend to place it near the top of any priority list.

According to the European Automobile Manufacturers Association (ACEA), there are 298 automotive assembly and engine-production plants in Europe. Of those, 142 make passenger cars, 28 light-commercial vehicles, 58 heavy-duty vehicles, 58 buses and 71 assemble engines, with some plants producing a mixed output. Germany has the most, with 42 factories, while France has 31 and Italy 23. Outside the EU, Russia has 31 plants, the UK 30 and Turkey 17.

Across Europe’s wider automotive manufacturing spectrum an estimated 3.5 million people are employed, with data suggesting that within the EU automotive accounts for 11% of all manufacturing jobs. Add in employment from retail and additional operations and that figure rises to 13.8m employed directly and indirectly, with automotive thereby making up 6.1% of all EU jobs. Big stuff.

This importance is both a blessing and a curse. These factories need to keep running at close to capacity to make economic sense, and that means cars need to keep rolling out of them come what may, even if there aren’t enough customers. The horrible truth is that even in non-Covid times there are too many factories for the number of customers. It’s why there’s always room for a haggle, and why many cars end up being self-registered each month to be sold on at a discount at a later date. Big it may be, but automotive has evolved poorly: supply outstrips demand.

Why not shut some factories? This age-old question is hampered chiefly by the challenges of manufacturers working to their own competitive agendas rather than a collective greater good, and – perhaps even more so these days – the industry’s importance as outlined above. Mooted automotive job cuts quickly come under the spotlights of governments and unions, the former willing to offer incentives to keep them open, the latter holding enough sway in some countries to kibosh any closure plans, no matter the economic logic.

For the foreseeable future many factories are running well below capacity. Social distancing protocols and a reluctance to build unordered cars are front of mind, with the bitter pill of potential losses made easier to swallow by government support schemes. But what happens when that support ends and a global recession means fewer people still are buying cars?

The pressure for closures will be applied again – and this time around the economically stressed governments won’t be in a position to respond, nor the unions able to justify holding their line. Painfully, but perhaps necessarily, the cuts may come.

READ MORE

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Inside the industry: UK automotive deserves more support

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scotty5 19 October 2020

He's no fortune teller.

Hang on a cotton picking minute, oversupply is the reason there are massive discounts? Surely not the same Jim Holder earlier in the year who said big discounts were ending?

whalley 19 October 2020

Marginal Losses

With so much cash already sunk into the existing plants across Europe, it makes sense to keep some spare capacity available for manufacturers just in case demand flips up a bit after Covid. The problem will come when these plants reach the end of their cycle life and major rebuilds are required. These usually occur at the end of long running models life, but will be occuring with greater frequency over the next 10 years as more capacity switches away from ICE cars. It may be worth spending £40/50 million to keep a plant active or efficient for the next 5 years but not the £400-900 million to retool, refit and rebuild it. Add to this, factor in that the UK now has no indigenous manufacturers. Politically, it will be easier for the EU to ensure that any manufacturer support stays in the EU. A position that EU unions will be happy to comply with. The UK plants will suffer as a result. Not today, not tomorrow, but slowly over the next ten years as decisions to rebuild plants come up. Our only answer to this must be to ensure we maintain the engineering know how and transfer it to non ICE vehicles. Government support for the supplier infrastructure (batteries, chargers, car components) for this is equally vital. With politicians that usually have a time horizon of a few months, this may be a big ask.

scrap 19 October 2020

There has been a chronic

There has been a chronic oversupply issue in the industry for decades. It will take something more than a global pandemic to shift it. Arguably, consumer credit is too easy to come by and maintenance and repair is undervalued. So personal debt levels are soaring and too many new cars being built.

Will86 19 October 2020

scrap wrote:

scrap wrote:

There has been a chronic oversupply issue in the industry for decades. It will take something more than a global pandemic to shift it. Arguably, consumer credit is too easy to come by and maintenance and repair is undervalued. So personal debt levels are soaring and too many new cars being built.

From my own very unscientific trawling of autotrader used car prices do seem to have suddenly increased again and new car prices have climbed (though I don't know how much discount you'll get on those). I can only assume that people aren't really looking at the total price but the finance price instead. But is this the next finance bubble that could burst as the impact of the pandemic on the economy starts to bite?

Marc 19 October 2020

whalley wrote:

whalley wrote:

With so much cash already sunk into the existing plants across Europe, it makes sense to keep some spare capacity available for manufacturers just in case demand flips up a bit after Covid. The problem will come when these plants reach the end of their cycle life and major rebuilds are required. These usually occur at the end of long running models life, but will be occuring with greater frequency over the next 10 years as more capacity switches away from ICE cars. It may be worth spending £40/50 million to keep a plant active or efficient for the next 5 years but not the £400-900 million to retool, refit and rebuild it. Add to this, factor in that the UK now has no indigenous manufacturers. Politically, it will be easier for the EU to ensure that any manufacturer support stays in the EU. A position that EU unions will be happy to comply with. The UK plants will suffer as a result. Not today, not tomorrow, but slowly over the next ten years as decisions to rebuild plants come up. Our only answer to this must be to ensure we maintain the engineering know how and transfer it to non ICE vehicles. Government support for the supplier infrastructure (batteries, chargers, car components) for this is equally vital. With politicians that usually have a time horizon of a few months, this may be a big ask.

It will be a big task to keep existing manufacturing facilities in the UK when model changes occur.  Whilst you can argue the UK does have an engineering skills advantage that largely applies to highly skilled roles rather than manufacturing, for now the biggest threat to the UK is model lines being transferred to Euro plants to fill undercapactiy and from the eastern euro zone where production costs are considerably lower.  The UK has some of the highest costs for automotive manufacturing, even if alot of its plant are some of the most productive.

UK labour rates are roughly on par with Italy and Spain, but considerably below France and Germany, but all are way above the likes of Czechia and Slovakia, etc. 

Other factors to consider, the UK also has some of the highest logistics costs in the Eurozone, in the top 3 for rail freight and top 5 for road.  Another big cost for any UK based facility and one that is often overlooked is that of business rates on the real estate the facility occupies.  During the sale of Vauxhall to PSA an audit found that whilst Vauxhalls footprint represented only around 5% of GM's Euro footprint, it incurred over 60% of its business rates costs, and we're not talking a few 100,000's of pounds, it's mulitple millions.

Peter Cavellini 19 October 2020

If they ever.

 If we ever get a good infrastructure of Buses and Trains for our local needs, then less cars would be needed, or should I say less journeys would be taken, and if we ever get to total EV transport in the distant future cars, any transport for that matter will be as interesting as the Fridge in our Kitchen, white, gently humming away doing it efficient quiet job, yes, transport could be that boring in the future.

Torque Stear 19 October 2020

Peter Cavellini wrote:

Peter Cavellini wrote:

 If we ever get a good infrastructure of Buses and Trains for our local needs, then less cars would be needed, or should I say less journeys would be taken, and if we ever get to total EV transport in the distant future cars, any transport for that matter will be as interesting as the Fridge in our Kitchen, white, gently humming away doing it efficient quiet job, yes, transport could be that boring in the future.

This is a commonly held fallacy, car ownership creates more journies rather than just taking pre-existing journies from other transport modes.

Far more passenger miles are undertaken using a car than have ever been possible by public transport. Furthermore no major nation has a particulary higher share of passenger miles by other modes.

I have seen papers where there was an attempt to cost out moving even a fraction of road passengers and frieght to rail and the size of the endevour made HS2 look thrifty.

Basically we are "stuck" with cars until we find something better, most likely it will be something using a 3rd dimension.

 

Vertigo 19 October 2020

Peter Cavellini wrote:

Peter Cavellini wrote:

if we ever get to total EV transport in the distant future cars, any transport for that matter will be as interesting as the Fridge in our Kitchen, white, gently humming away doing it efficient quiet job, yes, transport could be that boring in the future.

My i3 is probably the most fun, interesting, characterful car I've had, and wouldn't trade it for anything else - except maybe a Tesla, Taycan, Rimac. The more I've gotten used to it, the more I think that combustion's NVH just gets in the way of the good stuff. I'm more in tune with the car, more in tune with the road, more in tune with the world outside the cabin, and the motor still makes a good noise - but quietly enough that I can play music uninterrupted if that's what I'm more in the mood for.

This, also - I've just been away to the New Forest, and the traffic around Lyndhurst... the fumes are still making my throat raspy, days later. I used to think that EVs make an interesting alternative to ICE, now I think I'd just like all the tailpipes to f*** off into the history books. And for every malicious idiot who removes their catalytic converter or particulate filter to face jail time.

cambuster 20 October 2020

But I regularly do a >500 miles business round trip.......

........in one day (with Euro 6 emissions hardware in place), with more constructive things to do/ places to be - than sitting at a battery charger. When an EV can do that, I'm in. 

Vertigo 20 October 2020

cambuster wrote:

cambuster wrote:

But I regularly do a >500 miles business round trip in one day (with Euro 6 emissions hardware in place), with more constructive things to do/ places to be - than sitting at a battery charger. When an EV can do that, I'm in. 

If you're regularly driving more than 3 hours without a half-hour break, you need to inform your boss that your job is a serious health risk.

Also, rapids are normally located near cafes or shops; to date I've never spent any time waiting for the car to charge.

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