Automotive supply chain companies need to seize a “once in a generation” opportunity to exploit the renaissance of UK car manufacturing according to a leading industry figure.
And Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders (SMMT) has urged manufacturers to move fast to ensure they don’t miss out.
Mr Everitt was speaking ahead of a Meet The Buyer event organised by the SMMT aimed at bringing car manufacturers, tier one supply chain companies and smaller component makers together, held in Solihull on Tuesday.
Car manufacturers attending the event included Aston Martin, Bentley, BMW, Ford, General Motors, Jaguar Land Rover, Nissan and Tata Motors and more than 100 suppliers were in attendance to pitch to potential customers.
“We are very positive and this is a window of opportunity but it will not be open forever,” said Mr Everitt. “If we miss out that potential business will be gone for a generation. Then you don’t know whether you will ever get it back.
“This is a crucial time and it is about everybody playing their part in securing success.
“This investment has created a window of opportunity – probably a year or two at most for us to be able to seize it.
“New models will be produced over the course of the next 18 months to two years so sourcing decisions are being made now.”
The key driver has been the buoyant state of car manufacturing as highlighted by JLR’s recently announced record £1.5 billion profit. Added to that JLR has pledged huge investment in both R&D and new model development.
Mr Everitt added: “The background is relatively simple. We’ve had a wave of investment committed to the UK over the last 18 months – ranging from new facilities, model programmes, R&D and the supply chain.
“There’s General Motors and the new Astra being built at Ellesmere Port, JLR’s investment in a new engine facility, the success of the Range Rover Evoque and other products too.”
A number of factors are behind the potential boom, according to Mr Everitt, but all point to a desire by companies manufacturing in the UK to source parts closer to home.
“We are in a good place and all vehicle manufacturers have indicated they would like to be increasing their sourcing here in the UK,” he said.
“There are a variety of reasons, including the cost of transport. Some of the cost savings that were supposed to be achieved by outsourcing to supposedly low cost markets haven’t really materialised.
“Also there is an increasing emphasis placed on proximity to final assembly, particularly at the luxury end but increasingly at the volume end too. And there’s increasing demand for customisation and you can only do that if you have got key components located close to final assembly point.
“Finally the reduction of risk. Things like the Tsunami in Japan and the floods in Thailand are ‘black swan’ events that are only supposed to happen once in a generation.
"But we are finding these type of disruptive events seem to be happening relatively regularly.
"Vehicle manufacturers are now focused on the resilience of the supply chain and the relative risks associated with it. If more of the supply chain is closer to where final assembly takes place it enables more control and reduces risks.”
It might represent a “big shift” from the way business tended to be done in the industry over the last 20 years according to Mr Everitt but the upshot is a potential payday for UK companies.
That said challenges remain in ensuring UK companies’ capability is built up and re-established following what Mr Everitt described as a “steady erosion of UK capacity” to come up with the goods.”
The role of tier one supplier companies in the overall equation will also be key and Mr Everitt said he hoped a similar commitment to UK sourcing would be forthcoming, rather than looking to countries like China, Vietnam, Thailand, Poland, Slovakia and Slovenia, where rapid wage inflation and concerns over quality have prompted a re-think.
“We need to ensure key tier one suppliers are also on board with UK sourcing and need to re-establish networks that have been eroded over time,” he said. “We think there is a great opportunity and if things go well with it we will be very well set.”
The final pieces in the jigsaw according to Mr Everitt, are economic stability, government support and access to finance for suppliers.
“There is a range of things we have to address,” he said. “We need a level of economic stability across the eurozone. If we don’t life gets very difficult as it’s a key market for us.
“Businesses have a huge opportunity but in order to access it will they need to get finances to invest in new plant and new facilities.
“There is also the skills issue. Manufacturers might have got orders but are struggling to find the right people. It’s about a cultural shift – re-embracing apprenticeships and investment in training for employment generally – creating and strengthening the pool of knowledge and experience we have in the UK.”
For companies unsure of how to exploit the opportunity Mr Everitt said support was available via the Manufacturing Advisory Service, Regional Growth Fund grants and the SMMT’s industry forum, which offered productivity improvement and competitiveness training.
“The world pre recession and pre financial crisis we were creating was not the right one – it was too focused on services and not manufacturing,” he added. “We need to rebalance the economy so we have stronger manufacturing. But we are getting there and seeing some of the re-mergence of industrial policy.
“We have made huge progress the fact we global vehicle manufacturers are investing into the UK gives a strong indication we are doing something right. I am always keen to ensure we are not complacent – competition is intense, not just in the eurozone but around the world.
“Companies need to realise to succeed they need to be globally competitive. Those that want the business need to be able to convince people they are globally competitive and can stay globally competitive.”