President’s Annual Dinner speech – 25 November 2014

27 November 2014 #SMMT News

The following is the speech of the SMMT President, Tim Abbott (Managing Director, BMW Group South Africa) at the SMMT Annual Dinner in London on 25 November 2014.

Minister, distinguished guests, ladies and gentlemen.

On behalf of the SMMT, welcome to this, our 98th Annual Dinner.

Tonight is a dinner that occurs against a very strong economic backdrop.

The mood of optimism evident last year has continued into 2014. Increased consumer confidence has helped deliver consistent growth in passenger car registrations with the market up just under 10%.

Exciting new products are pulling more people into the showroom. Once there, they are presented with attractive finance products and an array of new technologies.

Ever-more efficient petrol and diesels, hybrids, electric, even hydrogen; new technologies matching customers’ aspirations for fuel economy AND mobility.

The commercial sector – ever the barometer of economic confidence – has grown by a remarkable 18%.

This despite a fall in HGV registrations as the industry shifts to Euro-6 standard – cleaner technology without a compromise in fuel economy.

Add to that a stable bus and coach market and we have a positive reflection on 2014.

However, the contrast with the rest of Europe is sobering.

New car sales are finally rising but the picture is mixed. Germany, Italy and France are growing – just. Spain is enjoying double-digit growth supported by government interventions. But look at the actual numbers and the picture is bleaker. Despite this double-digit growth the Spanish market will by year-end be – at best – only half – yes, half – the pre-recession peak.

Such weak growth is a major challenge for the UK automotive sector.

We still export over 80% of UK production and around half of that goes to the rest of Europe. The industry has rightly diversified its export markets in growing economies such as China, the US and South America.

But imagine how much stronger our plants could be if Europe was stronger too.

The automotive sector accounts for 3% of GDP and provides employment for more than three quarters of a million people.

Vehicle production is – despite the uncertainties – still forecast to increase to around two million by 2017. That’s an all-time record last achieved in 1972. But, it does need a strong European market.

For those of you who, like me, can remember 1972, the transformation of our industry – in products, technology, labour relations and management – has been remarkable.

In 1972, children used to rattle around in the back of cars like nuts in a can. You couldn’t see where you were going because of all the cigarette smoke and your flared trousers would be caught on the brake pedal.

Technology and engineering continue to spearhead change.

We have seen the world’s first driverless car – a universal solution to innumerable marital disputes! Cars that can achieve over 100 mpg, a UK plant producing over half a million cars – and customers coming into showrooms to tell the poor salesman the deal they should be getting.

But all these changes are helping the UK automotive sector. Why? Because we relish change. We have strength in technology and innovation. We have a flexible skillset that allows us to move quickly AND we have one of the best dealer networks anywhere.

The world’s global automotive companies continue to put a vote of confidence in the UK.

Ford recently announced a £190 million investment in an expanded diesel engine plant in Dagenham. Jaguar Land Rover opened its new engine plant in the West Midlands.

And component manufacturers such as Lear, Tenneco and Amtek have announced new production facilities here in the UK, creating over 400 new jobs.

I must pay tribute to the great work being done by Joe Greenwell and the Automotive Investment Organisation he leads. They have been instrumental in selling the UK as a home for automotive investment.

The AIO is just one of the ways the Automotive Council is helping the renaissance of the UK motor industry. Led by Vince Cable and Richard Parry Jones, the Council remains a model envied by other countries.

It is a forum where industry, government, academia, unions and the finance sector can meet to address challenges and deliver growth. It’s an institution that works.

The Council is striving to ensure the UK remains a competitive place for automotive investment.

It is embedding that competitiveness right down the supply chain through the LTASC programme – a programme which will see £90 million invested to help the UK supply chain compete globally. The recent Review into Supply Chain Competitiveness undertaken by Jaguar Land Rover’s Mike Wright endorsed just such support.

Increases in vehicle production are already fuelling growth for many suppliers. The Automotive Council recently identified opportunities worth £2 billion for upstream suppliers. This is in addition to the £3 billion worth of opportunities existing from UK vehicle manufacturers.

The time to reinvigorate our supply base is now and we must double our efforts to secure this growth.

The opportunities are perhaps greatest in areas of new technology and powertrain. This logic led the Automotive Council to create the Advanced Propulsion Centre. Opened earlier this month, the APC will help small, innovative projects leap into commercialisation. A call for projects has just opened and I would encourage any company with an innovative engineering idea to contact them to see how they can help catapult it to commercial reality.

So the industry is experiencing a renaissance. But there are many challenges:

Some are economic. The pound is strengthening, the Eurozone stuttering and access to finance remains difficult or expensive – especially for SMEs.

Secondly, we face some intractable structural challenges. Skills is the obvious one. One commentator said that in Germany they have a skills problem but the UK has a skills crisis.

So we must upskill if we are to remain competitive. The industry – again through the Automotive Council – is addressing this and we were delighted to receive government approval and financial support for our Industrial Partnership bid. This will be a start – but it is only a start.

The challenge is more structural. The UK has an ageing workforce. We HAVE to get young talent into OUR industry. Just about every company has some sort of outreach programme into schools and the Autocar Courland Next Generation Award – which will be presented later – has the same objective. The finalists you will meet later would each be a great addition to our industry and there are many more we have to inspire.

We used to see the finance sector as the main competitor for talent. Perhaps now it is new sectors such as information technology. But the automotive sector IS high-tech. The car of the present – never mind the future – is in many ways a mobile data provider that will only get ever-more sophisticated.

Automotive IS a career for the brightest and the best and it is one with a big future.

The third area of challenge is, as ever, environmental.

Our sector has a record that’s second-to-none in reducing carbon emissions despite the number of speeches here tonight!

Between 1995 and 2021 emissions for new vehicles will have been HALVED – 10 years ahead of the EU’s overall carbon reduction target of 40% across the economy.

Despite this we face criticism. Poor air quality is blamed almost exclusively on diesel engines. Let’s be clear; diesel emissions have decreased dramatically. Across Europe, a recent UNECE report said that over 90% of particulate emissions came from non-transport sources.

Yes, there are air quality hot spots – usually where congestion is at its worst – but we are introducing Euro-6 technologies which will address this. The latest HGVs and buses are proving this IN THE REAL WORLD, not just on a test cycle.

Let’s not demonise diesel. Diesel will remain fundamental to a low carbon transport sector for many years. And let us not forget that vehicles are – and will remain – essential to a functioning economy and society.

Finally we have political challenges. Global markets such as China are getting tougher. Political uncertainty in Russia and the Middle East threatens growth.

In the UK we expect the market to stabilise next year but 2015 will be a year of political uncertainty. The General Election and doubts over the benefits of the UK’s membership of the EU will cause anxiety.

For our sector, European membership is fundamental. In April, SMMT published a report reflecting members’ views. 92% said it was best for their business that the UK remains a member – albeit in a reformed EU. They like the surety of a single market – but they also value the access to funding, the ability to move people across the continent and the strength of being part of the world’s largest trading bloc.

We hope this strength will help deliver the political will to create a free trade agreement with the other great trading player, the US, through the Trans-Atlantic Trade and Investment Partnership.

But the biggest advantage is the fact that Europe is a single regulatory regime. The UK will always sell goods and services to Europe. Let’s make sure we are at the table influencing regulations to protect our industry.

The SMMT will continue to campaign for the UK to have a strong voice in Europe. This year’s Scottish referendum underscored the dangers of a negative campaign without a clear business message. We cannot casually exit Europe.

The automotive position is clear. It’s our biggest market, our biggest investor and our biggest advantage. Let’s not turn our back on it.

All the main parties want a reformed Europe but are more divided on the need for a referendum. The SMMT will remain apolitical but will – on your behalf – be advocating continued European membership.

We will also promote to the political parties four additional priorities:

  • The continuation of an industrial strategy to advance our sector;
  • Greater support for innovation;
  • Support for the development of – and market for – low carbon technologies; and
  • Maintenance of the UK’s business competitiveness.

More specifically, we want to ensure that any changes to motoring taxes – and there will be pressure on whoever forms the government to raise revenue – are fair and do not undermine the market.

We want to ease the financial constraints on businesses so they can invest.

We want to see issues such as business rates and energy taxation become more competitive. And, we want government to give greater support and recognition to vocational training and engineering.

We should not be defensive. We should be positive and confident. Vehicles are part of society and part of society’s future.

That future is a connected one – vehicle-to-vehicle communication and, vehicle-to-infrastructure. Autonomous vehicles are a long term possibility. However, we can deliver ever increasing safety, better fuel efficiency and greater capacity utilisation … now.

This is why, in March 2015, SMMT will host a seminar on connectivity and autonomous vehicles looking at the key issues; legal, data, privacy and safety. We will bring together stakeholders – communication companies, legal, insurance and government to discuss with industry how the UK can exploit its advantages. Vehicles are fundamental to this connected future and will NOT be a mere utility as some would have you believe. And I, for one, will still want a vehicle that I can actually drive.

This will be part of a range of events the SMMT will host to support you and your businesses.

I’m delighted to say that SMMT is going from strength to strength.

Membership is at record levels, financially we are strong and supporting the industry and its charities as best we can.

We have held a series of events – notably the annual SMMT Summit, two very successful Open Forums, our largest Meet the Buyer and a range of events abroad to make the potential of the UK motor industry globally recognised.

I think we’ve toured more than One Direction!

But like any great organisation, SMMT is about teamwork; dedicated experts producing registration figures, stats and reports, supporting members, handling difficult issues, working on behalf of us all. Never forget, the SMMT is our conduit to government and the public. Thorny issues such as keyless thefts have to be addressed and are often best handled from an industry viewpoint.

SMMT continues to do a great job addressing market issues, defending the industry and its interests and ensuring the UK remains one of the most vibrant automotive marketplaces in the world. With a General Election just months away; the EU debate at the very top of the political agenda and legislative pressures growing ever stronger, now is the time we need the SMMT more than ever.

It has been an honour and a pleasure to serve as President of this great organisation these past two years. As many of you know, I have recently taken up a new role at BMW outside the UK. It is timely, therefore, that I also finish my Presidency. However, I am delighted to hand over the role to someone who I know will bring fresh vigour, insight and expertise.

Ladies and gentlemen, the new and 79th President of the SMMT is the Managing Director of the UK component supplier, ebm-Papst, Gareth Jones.

I hope you will give him and the team at SMMT the same support and goodwill you gave me.

It has been a privilege to represent the UK industry, one I have enjoyed immensely. Thank you for your support, thank you for your patience and let me wish you all a prosperous 2015.

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