Manufacturing Outlook SMMT Open Forum September 20, 2011 Ian Henry - - PowerPoint PPT Presentation

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Manufacturing Outlook SMMT Open Forum September 20, 2011 Ian Henry - - PowerPoint PPT Presentation

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Manufacturing Outlook SMMT Open Forum September 20, 2011 Ian Henry AutoAnalysis SMMT, the S symbol and the Driving the motor SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED industry brandline are trademarks of SMMT Ltd

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SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED

SMMT, the ‘S’ symbol and the ‘Driving the motor industry’ brandline are trademarks of SMMT Ltd

Manufacturing Outlook – SMMT Open Forum September 20, 2011

Ian Henry AutoAnalysis

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SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 2

  • Significant announcements regarding long term

investment

  • Short term economic outlook is full of uncertainty:

– Another financial collapse? – A second credit crunch? – Collapse in consumer confidence? – Long term impact of Japanese earthquake and tsunami

  • VMs are talking positively, IAA full of optimism
  • Extensive restructuring at several VMs, eg BMW:

– “If exactly the same thing were to happen as in 2008, we certainly would not lose money … the company would march through it without a loss …” – Why and how? Younger model line-up, full plant utilisation, reduced leasing business exposure. And BMW has almost doubled 2011 hirings target

Introduction – 2011 a good year for UK auto sector

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  • Ward’s reports global sales up 5.2% y-o-y to July
  • North America, up 10.1% and Europe up 5.4%:

– Renault expecting global sales growth of 3-4%

  • Several European segments had strong H1 growth:

– Small minivans (eg Meriva), up 19% – Medium SUVs (eg Tiguan), up 25% – Large SUVs (eg Touareg) up 20% – Medium premium cars (eg 5-series), up 29%

  • Exports to N America up in H1:

– Audi +15.5%; BMW 5-series +59%; Mini +36.4%; – Land Rover +16.2%; Mercedes E-class +11.7%; – Porsche +33.6%; VW +26.2%, of which Tiguan +32.2% and Touareg +58.6%

  • New, young model line-ups help, esp. at VW-Audi, BMW and

Opel/Vauxhall. Mercedes, Hyundai and Ford in midst of major new programmes

Global sales actually quite positive:

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SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 4

  • 2010 production = c1.37mn – 2011 should

be c1.47mn

– And by 2015 UK production will be close to 1.9mn

  • Why?

– All major UK VMs have recently announced significant new investment, or confirmed commitment to UK – UK production to grow by c38% between 2010- 2015, vs. France 26% and Germany 18% – Growth at a variety of VMs, serving different segments, both high volume and niche – The 3 Japanese car companies have their main European car & engine plants in UK – Nissan Europe R&D in Cranfield, plus design centre in London

UK vehicle manufacturing will continue to grow

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  • BMW widening Mini range with coupe & roadster:

– Confirmed 3rd generation Mini – £500m investment in Oxford, Swindon & Hams Hall

  • GM fully using Ellesmere Port (sole source for Astra Sports

Tourer):

– Retaining Luton van plant, securing plant into 2020s

  • Honda to make next Civic & CRV in Swindon:

– Securing factory’s foreseeable future with 3 model line-up – Civic 5dr SOP late 2011, made only in UK for global supply

  • JLR retaining 3 assembly plants:

– Building own engine plant – Widening model line-up; new Jaguars and Land Rovers shown at Frankfurt – CX75 hybrid super car production confirmed – Plus Tata has its own R&D activity here

Increased commitment to UK vehicle production (1)

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SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 6

  • Nissan adding Leaf EV alongside Qashqai and Juke:

– Next generation Qashqai confirmed, £192m investment – £420m for Leaf and battery plants

  • Toyota centralising Auris production in UK from 2012:

– confirmed Avensis estate export contract for Japan

  • Aston Martin bringing Rapide back from Austria
  • Low volume MG production re-starting
  • Major Ford engine plants and HQ for diesel

development:

– Ford has retained low volume van production in Southampton

Increased commitment to UK vehicle production (2)

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SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 7

  • AutoAnalysis & SMMT surveys in 2009-2010 found genuine wish by VMs

to source more components in UK – both in established and new low carbon technologies:

– Detailed help for suppliers published by SMMT in report from Dr Holweg of Cambridge University

  • JLR announced UK sourcing of >£2bn for new Evoque
  • Nissan emphasised UK content of Qashqai
  • GM wants to use local suppliers for new van

– GM announced c£130mn additional UK sourcing in 2010 – But Nick Reilly has expressed concerns about strength of UK supply base:

  • Centralising Auris production in UK offers opportunities for Toyota

suppliers

  • Nissan Leaf EV and battery plants highlight the opportunities of the new

low carbon economy

UK VMs want to source components locally

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  • Nissan Leaf vehicle and battery plants
  • Toyota hybrid engines
  • JLR involved in hybrid test programmes
  • Highly efficient Ford powertrains
  • Hopefully GM will select UK for Ampera European

production

UK auto sector playing major role in the low carbon economy

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SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 9

  • Substantial investment continues, despite economic uncertainty:

– VW confirmed €62bn investment 2012-2016, mostly in Germany

  • German VMs widening product ranges, expanding into new

powertrains:

– BMW, Mercedes, VW, Opel will all have full EVs within 2-3 years – New Mercedes B-class will have petrol, diesel, hybrid, EV, natural gas and fuel cell powertrains …

  • Production capacity increasing, not being cut:

– Audi increasing capacity to cope with demand, bringing forward US assembly plant; even Volvo may build a US plant

  • Rising exports to North America not limited to premium

brands:

– Fiat starting major exports to US, from Italy, Serbia and Turkey

  • Significant growth in East European production 2010-15:

– Czech +31%; Romania +50%; Slovakia +63%

  • But the main opportunity outside UK is in Russia

European perspective – don’t rely just on UK

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  • Russian production by Western, Japanese and Korean brands will

rise by almost 6x by 2015: – Supplying new Russian plants will be the major growth

  • pportunity for European suppliers
  • Government policies encouraging investment in Russia, esp.

for factories of >300,000 upa, with 60% local content:

– Lack of quality indigenous suppliers means that VMs

need suppliers to follow them to Russia

  • VMs establishing new or expanding existing facilities to at

least 300,000 upa:

– Ford, GM, Renault, Volkswagen

  • Medium, 100,000+ upa plants:

– Toyota, Hyundai-Kia, Fiat

  • Small, c50,000 upa plants:

– Nissan, Suzuki, PSA-Mitsubishi

Message to suppliers – look east, to Russia

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SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 11

  • Rising vehicle production, supported by exports across

Europe and beyond

  • UK VMs are not dependent on the UK market; current export

ratios:

– Mini, Bentley, Land Rover and Toyota = >75% – Rolls Royce, Vauxhall, Honda and Nissan = >85%

  • Domestic opportunities increasing with wish by VMs to

increase UK sourcing

  • Demand for established technologies remains and underpins

the opportunity, alongside increased focus on new low carbon technologies

  • But don’t forget the big challenge which exists in Russia …

and longer term in India and China with JLR

In conclusion – despite the global uncertainty, the

  • utlook for UK auto manufacturing is positive