Brexit and The British Automobile Sector

Introduction

The role of the British automobile sector in the European and the world automobile industry landscape The European automotive sector is seen as a key sector both in the European economy and in the economy of each country in the European Union. With more than 13 million people working in the automotive sector, directly or indirectly, representing 6.1% of EU employees, of which 3.4 million highly qualified jobs, representing 11.3% of total EU employees, the automotive industry brings a significant financial contribution to the economies of European countries, through the payment of taxes and a positive contribution to growth.

Cars are a vital source of revenue for governments. For example, the taxation of motor vehicles has reached 413 billion euros annually. And this is only in the 15 largest EU Member States, this revenue representing almost three times the total budget of the European Union. The number of registered cars increased by 3.4% in 2017 as compared to 2016, so for the first time since 2007 and until now the symbolic threshold of 15 million units has been exceeded.

According to data provided by Erika Jonnaert, ACEA’s Secretary-General, in July 2018, “EU auto manufacturers exported 5.9 million motor vehicles in 2017, generating a trade surplus of €90.3 billion for the European Union. Compared with the EU’s total trade balance in manufactured goods, worth some €290 billion, automobile exports make a vital contribution to the overall trade position of the EU”. (www.acea.be)

Although the number of cars produced has increased significantly, from 11.9 million units in 2013 to more than 17 million passenger cars in 2017, car manufacturers have succeeded in reducing the impact of production on the environment in the past decade.

Get quality help now

Prof. Finch

Verified

Proficient in: England

4.7 (346)

“ This writer never make an mistake for me always deliver long before due date. Am telling you man this writer is absolutely the best. ”

+84 relevant experts are online

Hire writer

With 2.6 million trucks, coaches, buses and minibusses produced in 2017, we can say that for this category of cars, 2017 was a prosperous year. Below, an overview of the motor vehicles produced in 2017, in the European Union, per country:

Motor vehicle production in the EU BY COUNTRY / 2017

PC1 81,637 LCV2 – MCV3 9,326 HCV4 7,281  TOTAL

• Austria 98,244
• Belgium 318,333 – – 42,654 360,987
• Czech Republic 1,413,881 – – 6,112 1,419,993
• Finland 91,598 – – 120 91,718
• France 1,674,717 556,847 14,386 44,776 2,290,726
• Germany 5,645,581 378,651 23,009 126,607 6,173,848
• Hungary 472,107 – – – 472,107
• Italy 742,642 307,577 35,224 5,941 1,091,384
• Lithuania – – 26 26
• Netherlands 155,000 – – 81,577 236,577
• Poland 514,700 161,055 – 13,974 689,729
• Portugal 126,426 42,816 6,302 – 175,544
• Romania 364,654 – – 50 364,704
• Slovakia 949,365 – – – 949,365
• Slovenia 189,852 – – – 189,852
• Spain 2,291,492 608,233 8,803 27,341 2,935,869
• Sweden 254,079 – – 44,772 298,851
• United Kingdom 1,671,166 59,795 4,733 13,691 1,749,385
• European Union 16,957,230 2,114,974 101,783 414,922 19,588,909

SOURCE: OICA, IHS MARKIT

Even if these results are close to those for the financial crisis of 2007, the position of the car industry in Europe remains fragile, especially when we talk about developments in the automotive industry worldwide.

Worldwide, 2017 can be considered a good year in terms of car sales that rose 2.4% compared with 2016. According to Jato Dynamics, in the year 2017, 86 million cars were sold worldwide. South America and Southeast Asia are the markets with the most significant sales growth. Analyzing sales growth for each country, Brazil (+ 9%), India (+ 9%) and China (+ 2%) have witnessed substantial sales growth. In Europe, Germany still leads the top of the countries with the largest number of cars sold, namely 3.7 million units, a growth of only + 3%, less than the 5% increase and 2.5 million units sold by France.

According to analyst Jato Felipe Munoz, the results show that ‘car sales are doing well throughout the world, despite Brexit and the diesel crisis.’ With a decline of 5%, which resulted in just 2.9 million units sold, car sales in Marfa Britanie have ‘somewhat’ matched analysts’ predictions that considered a drop-in sale after a relatively good 2016 year. Probably this drop-in sale, alarming if compared to European or world results, is influenced by the uncertainty surrounding the Brexit negotiations. A brief review of Britain’s automobile history tells us that even if in 1950 the US was considered the most important carmaker, Britain could boast its second place in the top of automotive manufacturers worldwide.

Changes in the global political environment have also influenced the automotive industry, making the UK industry ranked 12th in the world in 2008, with a turnover of about 52.5 billion pounds. 2014 may be considered a year of revival for the UK automotive industry, if we refer to a record £ 63 billion in turnover compared to the European outcomes that  relatively moderate. This growth trend continued in 2015, when the brutal automobile sector had a turnover of 71.6 billion pounds, The 169,000 newly employed directly in the automotive industry and 345,000 in the spare parts market were a positive signal from the industry. The UK has the most productive automotive market in the EU, which response to strong domestic and export demand. The automotive sector is considered to be the largest manufacturing sector in the United Kingdom. 77.3% of the machines manufactured in 2015 were exported. 57.5% targeting the European Union, followed by the US (10.9%) or China (7%). The 2.7 million cars sold in 2016 (a 2.2% increase versus 2015) did not provide sufficient arguments for industry experts who forecast a decrease for the year in 2017 as opposed to 2016 as a result of the Brexit vote followed by the depreciation of the pound sterling, which leads to higher production costs.

Like other industries, the automotive industry is very sensitive to changes and political decisions, financial market fluctuations, or customer behavior. However, the British automobile industry has to face two major challenges: one as a result of Brexit and the other as a result of the new global regressions followed by the diesel scandal. The new European regulations on measuring fuel consumption, CO2 emissions and pollutant emissions from cars will be applied worldwide starting in September 2018 as shown in the picture below, indeed with minor differences application in practice, depending on the legal framework

Old standards:

• NEDC – New European Driving Cycle New standards:
• WLTP – Worldwide Harmonized Light Vehicle Test Procedure https://d3lp4xedbqa8a5.cloudfront.net/s3/digital-cougar-assets/whichcar-media/15665/wtlp-comp.jpg.

The UK automotive industry is distinguished by a wealthy heritage that hosts some world-renowned luxury brands (Bentley, Aston Martin, Rolls-Royce, Jaguar, Land Rover, McLaren, etc.) as well as various car manufacturers like Honda, Nissan, Toyota or Vauxhall, which make a significant contribution to the UK economy a year. Jaguar has always been a symbol of Great Britain that has greatly represented quality, durability and luxury. Jaguar’s promise through the famous quotes ‘To create and build beautiful cars that bring the pleasure and exhilaration of driving to life’ lies in the experience of driving a Jaguar. Today, the Jaguar-Land Rover group formed in 1968, is part of the Indian concern Tata Motors.

Marriage with Tata Motors concern has opened new opportunities for the Jaguar-Land Rover Group through its ability to penetrate the Indian market or other Asian markets. However, the high-class Jaguar used to make, requires the manufacturer to maintain the standards for which it was designed. Competition with world-renowned brands such as BMW, Mercedes or Audi, compels Jaguar to continue the innovative process without losing the glamor of luxury and quality already established. BMW is one of the most powerful competitors of the JLR group, especially the Jaguar brand. To determine the position of the Jaguar brand on the market, we will make analyzes competitors. BMW is an acronym for Bayerische Motoren Werke AG — or in English, Bavarian Motor Works. Whatever you call it, the German-based company is one of the world’s most respected automakers, renowned for crafting luxury cars and SUVs that offer superior levels of driving enjoyment.

Founded in Munich, the company began in the 1910s as an aircraft manufacturer, BMW’s current logo, designed to represent white propeller blades against a blue sky, reflects these origins, its blue-and-white color scheme also references Bavaria’s blue-and-white chickened flag. It wasn’t until 1928 that production began on the first BMW automobile, the Dixi. The car proved tremendously popular, and its success helped the manufacturer weather the Depression. BMW’s best-known pre-World War II vehicle was Type 328 roadster, a supple two-seater that racked up over 120 victories on the motorsport circuit between 1936 and 1940. Post-war BMW cars maintained this tradition, winning several racings, rallying and hill climb victories. The competitiveness of the Jaguar brand is influenced by various factors. A SWOT analysis gives us the opportunities and weaknesses that influence the success of the Jaguar brand. SWOT Analysis of Jaguar. Strengths Jaguar-Land Rover, JLR, has a variety of resources that give it a competitive position, developing premium vehicles with the iconic and aspirations of the brand.

The high-performance design and quality offer the brand the opportunity to maintain a premium price as a result of associating the brand with a social status equivalent to premium brand performance. As a result, JLR manages to achieve significant sales volumes in both established and new markets. Also, the already established position on the British market gives the mark a secure place in the British market. Weaknesses The production of the JLR Group is concentrated almost exclusively on premium and luxury vehicles. Group sales strategies are achieved through global sales but do not take into account the vulnerabilities that may arise from competitors who have a wide range of vehicles in their portfolio.

Emerging markets (such as China) offer no guarantee of success because JLR does not control distribution channels. JLR has focused on premium performance innovation but does not have a sustainable strategy for hybrid and electric vehicles. Opportunities Tata Motors’ significant investment in JLR’s innovation, research and design capabilities has already resulted in patents that will contribute to the launch of new products. Linking them to a healthy and sustainable business philosophy can offer the group the opportunity to reduce operating costs and flexibility in addressing challenges in uncertain economic situations. JLR can use the brand’s reputation to launch new products, hybrid or electric vehicles. Eventual support from the British government can help the group exploit new opportunities.

Threats

The challenges that JLR faces in the Chinese market as a result of the abbreviations on this market. On the other hand, the effects caused by Brexit are still unknown. A possible better placement on the British market is not a guarantee that the group will be able to expand its distribution globally as a result of possible barriers and import and export barriers. The SWOT analysis provides us with information about the opportunities and vulnerabilities of the JLR Group, especially the Jaguar brand.

The analysis of Jaguar’s direct competitors is required to complete the SWOT analysis. One of the Jaguar brand’s competitors is the well-known BMW brand.

Strengths

• the variety of resources
• established position on the British market
• Various distribution channels
• Present in different segments of the market
• Strong financial support
• Present in the electric vehicles segment

Weaknesses

• exclusively on premium and luxury vehicles
• have not a wide range of vehicles in their portfolio.
• Relatively high price

Opportunities

• Tata Motors’ significant investment
• can use the brand’s reputation World notoriety
• Possibility to be present on the market with electric vehicles
• The ability to penetrate new markets

Threats

• Uncertainties on the Chinese market
• Brexit

Brexit Changes in legislation

To analyze the macro environment that influences the Jaguar brand, a PESTEL analysis is needed JLR PESTEL Analysis Political Jaguar Land Rover Automotive Plc (JLR) is now a subsidiary of Tata Motors and has developed ambitious expansion plans within this concern. Using the iconic brand position in the UK, the company is seeking government support to develop a new site that doubles production from 500,000 to 1,000,000 cars a year, saying it would create 10,000 additional jobs, but to do this, Britain needs to invest in the necessary resources and regional infrastructure. The political will to preserve and create jobs in the UK and to protect trusted brands in the UK offers JLR  significant leverage. This leverage is even stronger when we look at government support previously granted by non-UK competitors such as Toyota.

Economic

An investment of more than $ 3 billion in 2015 has helped rejuvenate the business with new owners, alongside the focus on developing a premium range of automotive products for rich export markets. Business development resilience plans and preparation for the development of new markets have also been promoted by developing production facilities in Brazil and Slovakia. Sales in the period 2015-2016 increased by 13%, generating revenues of more than 22 billion pounds and a profit before tax of more than 1.5 billion pounds. The company managed to achieve these results, despite a significant market uncertainty in Europe due to the BREXIT decision, a slowdown in the Chinese and US market growth, and a £ 245 million stock loss following a major warehouse deposit. Social Despite the significant financial and reputational turmoil of the past, JLR remains a trustworthy and iconic brand that reflects aspiring social goals. Efficient marketing and production history in the UK helped make the brand embedded in the UK and globally as a reflection of quality, luxury and reliability. As a result, the business has succeeded in capitalizing on the social status of association with the brand. This has helped to maintain a pricing premium that extends to affiliated products (such as branded clothing) and has ensured that higher prices are also supported for second-hand machinery market products.

JLR has also been proactive in recognizing the evolving nature of customer value expectations by ensuring that its brands are associated with ethical and sustainable business practices. (BBC, 2016a; JLR, 2016) Technological JLR is not relying on its iconic brands to maintain its market share, recognizing that its competitive position is based on the ability to provide automotive solutions that meet the expectations of a demanding community of customers. To do this, the $ 3.1 billion investment in JLR technology and innovation is designed to ensure that it continues to lead the market in creating vehicles that people aspire to own. As a result, the business now leads in the development of lightweight aluminum technologies and has obtained patent rights in a wide range of engineering solutions. JLR’s focus on maintaining a long-term technological advantage is reflected in its skills development programs built around the creation of the National Automobile Innovation Centre and its partnership with the Warwick Production Group. (JLR, 2016; Gleeson, 2015; Guardian, 2017) Legal JLR adopts a strong approach to the protection of its trademarks and patents, as evidenced by their recent legal challenge against a Canadian company attempting to use the name ‘De-fender’ (even though this JLR vehicle is not currently produced). However, in newer markets such as China, where patent and trademark protection may be a bit more ‘fluid,’ it may pose a greater legal problem.

This problem could undermine plans to effectively extend prestigious sales in these regions, as local versions and similar derivatives are produced. (Kapferer, 2012; JLR, 2016; Jaguar, 2017) To overcome such problems, JLR used a collaborative approach to launch its products in China. However, this did not prevent a dispute between JLR and Jiangling Motor Holding on de-sign similarities between Range Rover Evoque (JLR) and Land Wind X7 (Jiangling). (JLR, 2016; W MG, 2016; WMG, 2017) Environmental JLR has developed a lifetime approach to sustainability issues by trying to capture and understand the full environmental impact of its products and manufacturing operations and then incorporate performance-enhancing targets accordingly.

In addition to meeting regulatory and regulatory requirements, the company is trying to become carbon neutral by 2020, through revised production processes and offset programs. As part of its innovative design process, JLR continues to reduce vehicle emissions, improve fuel economy and reduce the environmental impact of its production sites. However, while pursuing a major electrification research program and providing clear indications of their intentions and capabilities in the FIA Formula E championship, JLR’s competitors continue to develop, distribute and sell production models. (Earley, 2013; JLR, 2016; Jaguar, 2016) Competition analysis is  essential for a brand like Jaguar that wants to grow in a competitive market. Below is an image with the important points of this analysis.