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.
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.
Over 80% of the volume of vehicles manufactured in the UK today are exported and more than 50% of exports go to the EU. 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. 
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.
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. Last year, the automotive sector invested more than £1.5 billion in R&D in the UK.
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 and overall sales of UK cars in China are projected to increase from £2 billion in 2011 to £9.3 billion by 2020. UK car export volume to China grew by 64% from 2011 to 2012 to account for 8% of total export volume. 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.
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.
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.
Percentage of vehicles manufactured in the UK that are exported
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, the need for UK and EU manufacturers to break into these markets is obvious.
 ONS, 2010
 SMMT ,‘Motor Industry Facts 2013’, 2013
 BIS, Driving Success – a strategy for growth and sustainability in the UK automotive sector, July 2013
 SMMT ,‘Motor Industry Facts 2013’, 2013
 CBI, Full Speed Ahead, 2013
 CBI, Full Speed Ahead, 2013; and data from SMMT
 McKinsey, ‘
 Automotive Council UK website, ‘Invest in UK automotive’, accessed September 2013, available at
 SMMT website, accessed October 2013, available at:
 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:
 CBI, ‘Playing our strongest hand: maximising the UK’s industrial opportunities’, 2012
 SMMT survey data
 McKinsey, ‘
 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
 The Times of India, ‘Deep divide in autobahn over EU FTA’, 3rd May 2013, available at
 Marcos Chamon, Paolo Mauro & Yohei Okawa, Mass Car Ownership in the Emerging Market Giants, 2008