The news that Honda is set to close its Swindon manufacturing plant in 2021 is a major shock, and a huge blow. To the UK car industry. To Swindon. And, most importantly, to the 3500 workers set to lose their jobs – and the thousands of others who work at firms that supply and service it.
The Japanese firm has been building cars and engines at the plant since 1989, and as recently as last autumn the firm said it was committed to production there, regardless of the outcome of Brexit negotiations.
It’s hard not to consider Honda’s decision in the context of other bad news to hit the car industry in the UK, such as Jaguar Land Rover’s job cuts, or Nissan reversing its decision to build the next-generation X-Trail in Sunderland. It’s natural, then, to try and connect the dots, to try and identify some single ill that has befallen the industry. And, of course, in the current political climate it’s inevitable some will suggest that single ill is Brexit.
Is Brexit uncertainty a factor? Almost certainly. As Jim Holder wrote following Nissan’s X-Trail decision recently, such uncertainty makes it difficult for companies to plan long-term. And car companies need to plan long-term. But it’s not the only reason – or the key reason, in this case.
You have to consider the decline in demand for diesel too: Honda’s Swindon engine plant produced diesel engines. Then there’s the ever-growing rise in popularity of SUVs, which is harming sales of traditional cars such as the Civic – the only model made in Swindon.
And you can’t ignore global trade, such as Donald Trump’s threat to impose huge tariffs on cars imported from Europe into the US – such as the Civic. At the same time, the European Union and Japan recently agreed a trade deal that effectively removes tariffs on Japanese-built cars imported into Europe. That reduces Honda’s need to have a European manufacturing base.
There’s also Honda itself. The firm continues to struggle in Europe, with sales markedly down on a decade ago. Last year it sold just under 135,000 cars in the European market, a three per cent decline on 2017 – and around half its sales of a decade ago.
As a result, it has increasingly focused production in its home country in Japan, at the expense of factories elsewhere. The Swindon factory produced around 160,000 Civic models last year, but at its peak ten years ago its output was around 250,000. This is the latest in a pattern of decline.