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United Kingdom Autos Report Q1 2011
Business Monitor International, Jan 2011, Pages: 53
United Kingdom Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on United Kingdom's automotive industry.
A serious inconsistency in UK’s electric vehicles (EV) programme came to light in November 2010 when National Grid CEO Steve Holliday highlighted concerns that as more drivers use EVs, it could put pressure on the UK’s electricity grid. The concern adds to existing woes that the UK lags far behind other countries in terms of establishing EV charging points and also faces the embarrassing prospect of electricity shortages, with around 15% of the country's generating capacity facing closure from as early as 2013.
This report sees these concerns as a stark contrast to the 25% discount on EV purchases up to GBP5,000 offered by the government in a bid to encourage EV sales. The publisher, however, remains concerned about the underlying weakness in consumer spending in the UK, after new passenger cars demand continued to fall for the fifth consecutive month in November 2010. We expect this condition to continue well into 2011 as household spending suffers in the wake of continued falls in house prices, while the loss of cheap credit and continuing high unemployment (with the government's budget cuts fuelling fears over job security) will also keep a tight lid on consumer spending. As such, BMI expects car sales in 2011 to fall over 5% year-on-year (y-o-y), to 1.92mn units. Although we expect sales to grow thereafter, the market may find it difficult to maintain any growth higher than the average 2.4% y-o-y between 2012 and 2015.
From the point of view of production, the new Conservative-Liberal Democrat coalition government formed in May 2010 has revealed its commitment towards supporting innovation in green technology and focusing on electric vehicles. The market has so far shown a far more impressive recovery than the 24.3% y-o-y growth anticipated by BMI for end-2010, thanks to production rising nearly 32% y-o-y to 1.15mn units during the first 10 months of the year, according to the Society of Motor Manufacturers and Traders (SMMT). While we expect the growth to continue for the remainder of the forecast period, BMI fears that a complete recovery to pre-crisis levels may not be possible anytime during the forecast period. As such we limit our production output forecast to only 1.62mn units by the end of 2015.
Although the competitiveness of the UK's manufacturing industry is a big attraction for carmakers looking to increase production in Western Europe, BMI points out that the regulatory environment, along with currency movements and material costs, will be important factors determining whether carmakers will undertake major projects in the country.
Based on the competitiveness of its manufacturing industry and regulatory environment, the UK is in first place in BMI's Business Environment Ratings for the auto industry in Europe. The extent to which operating environments can affect carmakers has been illustrated by the 'landmark pay and conditions settlement' that British carmaker Jaguar Land Rover (JLR) reached with labour unions in October 2010, enabling the company to reverse its decision to close down one of its three plants in the UK.
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