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

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

Introduction – 2011 a good year for UK auto sector • 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 SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 2

Global sales actually quite positive: • 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 SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 3

UK vehicle manufacturing will continue to grow • 2010 production = c1.37mn – 2011 should be c1.47mn – And by 2015 UK production will be close to 1.9mn • W hy? – 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 SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 4

Increased commitment to UK vehicle production (1) • 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 SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 5

Increased commitment to UK vehicle production (2) • 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 SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 6

UK VMs want to source components locally • 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 SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 7

UK auto sector playing major role in the low carbon economy • 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 SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 8

European perspective – don’t rely just on UK • 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 SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 9

Message to suppliers – look east, to Russia • Russian production by Western, Japanese and Korean brands will rise by almost 6x by 2015: – Supplying new Russian plants will be the major growth opportunity 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 SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 10

In conclusion – despite the global uncertainty, the outlook for UK auto manufacturing is positive • 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 SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 11