The UK may have invented the automotive industry but it needs to focus on niche markets and the "really clever stuff" if it is to survive the challenges of the 21st century, a conference was told.
Peter Cooke, KPMG professor of automotive industries management at Nottingham Trent University, said Britain could not just concentrate on value added products if it was to survive the cut-throat competition from eastern Europe and the Far East.
Speaking at the Autolink 2006 conference at Millennium Point, he said Britain would have to move to "really clever" areas like engine production and prestige brands where price pressures were less intense. New factories specially set up to house the latest equipment could also make Britain more competitive by increasing productivity and reducing the relatively expensive labour costs involved in making cars.
Niche markets could also provide a way for the country to harness its design and development expertise.
Prof Cooke said: "The last couple of years have not been good for the British automotive industries and particularly the West Midlands.
"Globalisation is a two edged sword - it means potentially huge new business opportunities but takes no prisoners and does not respect history.
"The UK invented the automotive industry - it now needs to redefine its role to ensure a healthy future in a rapidly evolving global industry.
"If we want to stay at the forefront, it means the industry and the country must find new ways to compete globally."
As a country Britain can encourage carmakers to build here through higher productivity, more flexibility, with a highly skilled workforce, said Prof Cooke.
This would have to be supported by a second to none supply base and distribution system working in a dynamic market.
But despite this, the centre of the automotive industry continues to move east with many automotive firms setting up in Poland, Slovakia, Romania and Hungary, he said.
Hyundai and Kia have recently invested in the Czech Republic, while Skoda is increasing its production levels. But with a shortage of labour in these countries, and rising living standards, some car manufacturers and their supply chains could move even further to the east - to the Ukraine, Turkey and Iran, unless they are encouraged to lay down deep roots.
Prof Cooke said: "I think eventually we will see about 70 per cent of the European automotive industry in the west and about 30 per cent in the old eastern Europe.
"But there is evidence that some of these investments are only for five to ten years rather than the long term.
"Also, countries in eastern Europe are increasing their skills levels and are moving from price to productivity and value added as ways of developing their industry.
"That means Britain has not just to do the clever stuff, but the really clever stuff in the future.
"The United Kingdom cannot expect to be able to compete in all areas of the components industry but to gain real advantage by specialising and utilising the skills and technologies at which we excel."
Engine manufacture was one area Britain could prosper with more than three million units being produced a year at plants like BMW's factory at Hams Hall, Warwickshire.
Prof Cooke said: "It is these very capital-intensive sectors in which the UK excels, and it needs an innovative components sector providing quality subsystems and new ideas that will keep the sector buoyant and successful."