Automotive: attracting global investment

Automotive: attracting global investment

Sector Overview

  • Gross Value Added: £6 billion[74]
  • Jobs: 139,000[75]
  • Exports: £34 billion
  • Exports to EU: 51% of total value
  • UK global market share: 2.3%
  • Companies: over 2,500 companies
  • UK Turnover: £55 billion[76]

The UK possesses one of the most diverse and productive automotive sectors in the world, which is well positioned to drive growth and investment across the UK economy.

The automotive industry in the UK is fully integrated into the EU industry, with significant EU supply chains and substantial exports of finished vehicles and engines to EU markets.  The Automotive council believes that the UK’s active membership of the EU is an essential and factor in the automotive industry’s current and future success.[77]

With seven global volume car manufacturers, eight commercial vehicle manufacturers, ten bus and coach manufacturers, eight Formula 1 teams and over 2,000 component manufacturers in the supply chain, the UK’s automotive sector is highly diverse in both output and ownership.[78]

Over 80% of the volume of vehicles manufactured in the UK today are exported and more than 50% of exports go to the EU.[79] With total export value of £31 billion in 2012, the sector accounts for 11% of the UK’s total exports and has attracted over £7 billion of FDI over the past two years. [80]

Global Trends

Technology is driven by the global push to reduce emissions. The EU – and other markets which are adopting the EURO standards – have some of the most challenging CO2 standards. Emissions regulations are driving a significant increase in the manufacturing costs of vehicles, with estimates that meeting the EU’s 2020 emissions targets of a 40% reduction will increase costs by almost €2,000 per vehicle.[81]

Increasing R&D intensity. Responding to the global push for cleaner vehicles is requiring a significant increase in the amount of R&D spending, with estimates that  £150 billion could be invested in low-carbon vehicle technology over the next 20 years[82]. Last year, the automotive sector invested more than £1.5 billion in R&D in the UK.[83]

Global competition for labour. Firms around the world are finding recruiting skilled employees challenging. The UK sector faces significant skill shortages but, in a global market dominated by the US, China, Japan and Germany, the UK will have to dramatically increase the supply of both domestic and foreign labour to remain competitive with many current employees due to retire over the next decade.

Huge demand in emerging markets. Sales of British-built Jaguars and Land Rovers in China increased by 71% in 2012[84] and overall sales of UK cars in China are projected to increase from £2 billion in 2011 to £9.3 billion by 2020.[85] UK car export volume to China grew by 64% from 2011 to 2012 to account for 8% of total export volume.[86] Global vehicle production is also shifting strongly to China and other emerging markets: it is estimated that, by 2020, Asian markets will account for half of global passenger car production.[87]

Case Studies: UK exports are growing in Asia but Europe is the main market

Nissan: Nissan are the largest UK manufacturer of motor vehicles, producing over 510,000 cars in 2012 – accounting for more than one third of the UK’s total production. Over 80% of production is exported and the plant recently started production of the Nissan Leaf  – the UK’s first mass produced electric car.

Jaguar Land Rover: There were record sales from Jaguar Land Rover (JLR) in 2012, with more than 350,000 vehicles delivered to customers around the world from the company’s factories in the West Midlands and Merseyside. A 71% increase in sales saw China become the company’s largest single market with over 70,00 vehicles sold. In addition, sales in emerging markets in South East Asia and Latin America are growing strongly, complementing a the strong rise in sales in more traditional markets in North America and Europe. Exports account for 85% of JLR’s revenues.[88]

Vauxhall: Ellesmere Port has been chosen as the lead European plant for the production of the new Vauxhall Astra beginning in 2015. The plant's high-level of productivity, flexible labour market and integration into UK and EU supply chains helped secure the £125 million investment from the US-based parent company General Motors. After the investment, the plant will have an annual capacity of over 220,000 cars.

Toyota: More than 3.25 million cars have been produced by Toyota in the UK over the last 20 years. Toyota’s UK plant was the first in Europe to produce a full hybrid vehicle and its engine factory in Wales was the first outside Japan to produce hybrid engines. Toyota employs 3,800 people and, in 2013, makes around 180,000 cars a year – of which 160,000 are exported, including 140,000 to the EU.

BMW UK: BMW Group’s continuing investment in its UK manufacturing and business operations amounts to over £1.75 billion since 2000. The company and its dealership network employ 18,000 people directly while supporting more than 46,000 UK jobs in total. Eighty per cent of MINIs and over 90 per cent of Rolls-Royce Motor Cars are exported. Together with engines built in the UK for BMW and MINI brand products, the BMW Group exports over £2.4 billion worth of products each year while sourcing £1.2 billion worth of goods and services from UK-based suppliers. The production of the next-generation MINI at its Oxford plant, beginning in November 2013, is an indication of the BMW Group’s future commitment to the UK, further establishing its position as a major investor, employer, manufacturer and exporter.

Advantages of EU membership: access to the EU market has driven foreign investment

Access to EU markets has been a key driver of foreign investment into the UK automotive sector. EU action to remove controls on capital flows has promoted significant FDI in both the supply chains and the final manufacture of motor vehicles in the UK, with a number of announcements in recent years. For example, Nissan and Toyota chose the UK as their base for wider European operations and have continued to make significant investments in the UK.

The creation of common regulatory standards across the EU has created significant economies of scale across Europe. Since 2009, European Directives have cemented approval processes for new vehicles sold in Europe. Emissions standards for passenger and commercial vehicles have also been standardised, creating a clearer roadmap for R&D activities. EU regulation has also influenced other markets to recognise or adopt the EU’s standards in many areas such as crash safety and environmental performance, creating further benefits based on common standards.

Challenges of EU membership: a lack of progress in some trade deals limits growth

While the UK already exports cars to markets outside the EU in large volumes, the slow progress on negotiating better market access with major economies like India, China and Brazil has limited potential growth. In the case of India, UK exports currently face tariffs of over 100% in some cases, while Indian exports to the EU face only a 10% tariff.[89]

82 %

Percentage of vehicles manufactured in the UK that are exported

Forward Agenda: the automotive sector needs the EU to strike equitable trade deals

The maintenance of an EU wide-market will be essential to promote the economies of scale needed for research into low-carbon vehicles (with a focus on energy storage and management, electric motors and power electronics, internal combustion engines, lightweight vehicle and powertrain structures, and intelligent mobility).

Effective FTAs, enabling fair competition with growing markets, is a priority for the sector. With car ownership in China alone expected to overtake the US by 2030, and with China and India together being expected to account for a third of all global car ownership by 2050,[90] the need for UK and EU manufacturers to break into these markets is obvious.


[74] ONS, 2010

[75] ELMR

[76] SMMT ,‘Motor Industry Facts 2013’, 2013

[77] BIS, Driving Success – a strategy for growth and sustainability in the UK automotive sector, July 2013

[78] SMMT ,‘Motor Industry Facts 2013’, 2013

[79] CBI, Full Speed Ahead, 2013

[80] CBI, Full Speed Ahead, 2013; and data from SMMT

[81] McKinsey, ‘

[82] Automotive Council UK website, ‘Invest in UK automotive’, accessed September 2013, available at

[83] SMMT website, accessed October 2013, available at:

[84] Jaguar Land Rover media centre, ‘Jaguar Land Rover Announces Record Global Sales - Up 30% In 2012 And 800 Jobs In The UK’, accessed September 2013, available at:

[85] CBI, ‘Playing our strongest hand: maximising the UK’s industrial opportunities’, 2012

[86] SMMT survey data

[87] McKinsey, ‘

[88] Jaguar Land Rover media centre, ‘Jaguar Land Rover Announces Record Global Sales - Up 30% In 2012 And 800 Jobs In The UK’, 13th January 2013, available at

[89] The Times of India, ‘Deep divide in autobahn over EU FTA’, 3rd May 2013, available at

[90] Marcos Chamon, Paolo Mauro & Yohei Okawa, Mass Car Ownership in the Emerging Market Giants, 2008