➤ Investment in the U.K. car industry has "fallen off a cliff" since Brexit referendum.
➤ Persisting uncertainty makes it hard for investors to evaluate U.K. competitiveness.
➤ U.K. engineering, electronic prowess has much to offer automotive sector's technological transition.
Mike Hawes is chief executive of the Society of Motor Manufacturers and Traders, or SMMT, which represents players large and small within Britain's £19 billion automotive sector. Arguably his most important task since the U.K.'s Brexit referendum has been to warn politicians of the industry's vulnerability to a withdrawal from the European Union and its customs union without a trade deal. S&P Global Market Intelligence spoke to Hawes at the Frankfurt Motor Show to ask whether Brexit has already begun to harm the industry in advance of the U.K.'s departure. The following is an edited transcript of that conversation.
S&P Global Market Intelligence: Has Brexit already caused tangible damage to Britain's car industry?
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders |
Mike Hawes:
Do the industry's lengthy product planning cycles make it more vulnerable to harm than other sectors?
Soon Nissan Motor Co. Ltd. will be making a decision on the next generation [Qashqai], which they will be starting to produce in the early to mid-2020s. We want to make sure we are competitive, and the U.K. is in a position to win those types of investments, and we need that now because the decisions get taken in advance. When you have the start of production, the decision to make a car has actually been taken four years prior. To a certain extent, the investors can sit on their hands, but at some stage, they've got to make their decision and you're seeing that imminently in terms of Vauxhall at the Ellesmere Port plant.
I think we always said there was going to be a bit of a downturn in investment because it is cyclical. But if you look at the fall, which has been precipitous, and talk to potential investors, they are saying, "Well, we can't invest until there's clarity about your future trading relationship with your biggest market because it's hard to price that investment because you don't know what your future trading conditions are going to be."
Has this damaged the trust of foreign investors in the U.K. and, if so, might it be difficult to rebuild that trust?
Investment is made on the basis of facts and figures and what the cost is and whether I can reliably develop that vehicle and produce it at a cost-competitive price to my market. But there are also the intangibles. If I invest in that market, is it politically stable? Do I feel the environment is right? Does the government want this investment, because it's often a billion-pound investment? It's the softer things as well.
There is no doubt that the U.K.'s reputation for political stability has obviously collapsed. You just have to turn the news on every day. What we need to do is get this resolved, get a deal and get on the offensive very quickly that the U.K. is still a good place to invest because of the fundamentals in terms of cost competitiveness, workforce flexibility, skilled labor force and engineering excellence. That hasn't gone yet, but we need to keep it.
What role can the U.K. play in the auto industry's shift to a zero-emission, shared and connected future?
We're a large new car market. We're a relatively affluent one. We have a lot of engineering expertise. We're very good at power control technologies. We have 2 gigawatt hours of battery production, but we need more if the value is going to be in the battery. We need to attract battery investment. By 2025, Europe will have about 135 gigawatt hours both cell and pack production. We've got 2 gigawatt hours, and we need to have a lot more.

