Originally printed in the UK Science and Technology edition (issue 3) of Public Service Review – reproduced with kind permission of publicservice.co.uk Ltd 2011.
Public Service Review asks Paul Everitt, Chief Executive of the Society of Motor Manufacturers and Traders, about the steps needed for the automotive industry to prosper…
The transport sector faces many challenges in the 21st Century. People are more mobile, and commuting great distances nationally, and even internationally, is commonplace. Trains run more frequently, air travel is undertaken even within the UK, and there are more cars on the roads than ever before. However, there is pressure on the automotive industry to move towards greener transportation methods.
Government and European Commission guidelines dictate that the UK needs to reduce emissions significantly. The automotive industry therefore has to strike a delicate balance, creating a sustainable supply chain while maintaining consistent output.
Talking to Public Service Review, Paul Everitt, Chief Executive of the Society of Motor Manufacturers and Traders, sheds light on how the industry is approaching this challenge, and what the future holds.
How is the UK automotive industry tackling transport challenges?
In the UK motor industry there is a renewed drive, led by government, to rebalance the economy and create one fuelled by manufacturing and exports. There is also the challenge of creating a low carbon society that benefits industry.
Working collaboratively with government through the Automotive Council, industry has developed a common technology roadmap for developing low carbon vehicle technologies over the next 20 to 30 years. Based on this, we have charted the UK’s technological and industrial capabilities to identify the areas that are key to achieving low carbon targets, while allowing the UK to retain its industrial strength.
This framework of key technologies can be used as a guide to coordinate R&D funding that organisations such as the Technology Strategy Board provide.
Do manufacturers need to collaborate more with other sections within the automotive industry?
Definitely. While vehicle manufacturers are often very good in certain fields of technology, the cost of developing technologies for regulatory regimes poses a huge challenge. No company can take responsibility for all areas of technology. Therefore, there needs to be a collaborative model with a number of key manufacturers working together on certain areas. Manufacturers must collaborate with technology providers to fast track the technology they need.
How much support is there to develop the infrastructure for automotive technologies, such as plug-in stations for electric cars?
There is a lot of support. With the ‘Plugged-In Places’ scheme, the government is providing funding and exploring how we go about financing alternative fuel infrastructure. Although challenging, there is a clear willingness between vehicle manufacturers, technology providers and energy companies not only to get involved but to raise the finance required to see initiatives like this through.
What role does the automotive industry play in growing the UK economy?
The automotive industry already plays a substantial role by employing over 700,000 people. It is by far the largest manufacturing exporter in the UK, selling over 80% of all vehicles and 70% of engines overseas. However, there has been a shift in the political outlook as a result of the recession and a recognition that designing, developing and manufacturing here means that we can sell abroad as a priority. This is where UK industry is well placed to generate greater returns for the economy.
What is interesting is that while there is greater scope to create employment and investment through the manufacturers, the real opportunities are further down the supply chain.
Over the past 20 to 30 years we have seen the ‘hollowing out of the supply chain’ with manufacturers choosing to source goods increasingly in Eastern Europe and Asia. Now, there is a reversal of that trend with companies actively trying to resource or repatriate sourcing back to the UK for a number of reasons – the main one being that the cost of transport is increasing significantly, and extended supply chains are not only expensive, but also more vulnerable.
We have seen a variety of instances over the past few years where events have disrupted the supply chain. For example, if something has to come from China it takes a significant amount of time to arrive, so manufacturers have had to hold large stocks to ensure that the product lines don’t stop. Many companies do not see this as sustainable in the long term.
However, the benefits of sourcing in low-cost countries haven’t materialised. Wage inflation and cost inflation have risen sharply in Asia and Eastern Europe, eliminating the savings that were going to be made by sourcing in the East.
The costs associated with maintaining high quality from extended supply chains can be very tough. Sending a team out to China to address a quality issue is both difficult and time consuming for most companies. Obviously, this is much easier if the distributor is located down the road.
Should the adoption of future vehicle and fuel technologies be left to the market or should government take the lead?
For the consumers it is important that they get a clear signal over the direction of policy. From an industry perspective it is important that government sets the target and objective, but does not dictate the mechanism of how to achieve that objective.
The goal of reducing carbon has different routes, and different companies will have their own approach to achieving that. It’s the government’s role to encourage behaviour and create the incentives that promote the change, but not necessarily dictate the specific solutions for those problems.
It is important that the consumer understands that the world is not going to change overnight. What we will see is a gradual development, and these technologies will become more effective, offering more value for the consumer over time. As the volume of product increases, the competitiveness over price will also improve.
Over the next 10 to 15 years, we will see a slow but steady increase in the proportion of the market that is ultra low carbon. This sector will deliver significant environmental gains, while hopefully embedding into the UK the industrial capability that will allow us to become the focus of a significant number of low carbon vehicles, which we can export around the world.
What effect will there be on manufacturing on a regional level?
It is a very different political environment right now with the ending of the Regional Development Agency structure and the development of the Local Enterprise Partnerships. However, the priority remains, both locally and nationally, to ensure that the right incentives are in place to facilitate sustained investment in R&D, skills and new capital equipment. Investment is how the future will be secured.
The automotive industry has to an investment-led business and the more investment that can be attracted the better the future will look.
Is the UK investing enough in engineering and STEM, or providing adequate access to careers in manufacturing?
More can always be done. There are more jobs than there are people available, the challenge is how development is supported over the longer term. If there are people willing to invest, that’s great, but if the right people with the right skills can’t be found, that undermines the investment. There has to be a commitment to raise the number of people in the automotive industry with these skills, and that is tough.