At the launch of the Institute of Export & International Trade’s (IOE&IT) Automotive Special Interest Group (SIG) yesterday (1 May), members heard from industry experts on the state and future of the UK’s carmaking sector.

The session featured expert commentary from IOE&IT trade and customs specialist, Laura Williams, and senior trade policy manager at the Society of Motor Manufacturers and Traders (SMMT), Alessandro Marongiu.

You can sign up for future sessions here.

Automotive booms

The automotive industry had a particularly positive year in 2023, according to Marongiu.

“The UK new car market in particular has recorded its best year since the pandemic, with more than 1.9m new vehicles registered.”

UK vehicle production also hit 1m units in 2023, the first time since 2019, with overall output increasing by 17% on a year-by-year basis, primarily due to the end of pandemic-related supply chain challenges.

“In particular, the end of chip shortages, the end of lockdowns and the changing production process certainly had a positive impact and combined to drive annual output up to more than one million units last year.”

The EU remains the UK’s largest partner, with Europe taking up to 60% of Britian’s imports.

“Essentially more than four out of 10 cars, produced in the UK, are ultimately directed to the EU.” 

Electric future

The last year has seen almost £20bn invested in the automotive industry, as both government and business look to an “electrified future”.

Companies like Nisan, Ford, Mini, Tata Motors and Jaguar Land Rover are all looking to fuel their transition to an electrified future, with investment in finished vehicles or critical parts for electric models.

“It's fair to say that we are in a in a much better position today compared to a few years ago,” said Marongiu, “but the challenges are truly unrelenting, and they are both domestic ones as well as international.”

TCA

Given that Europe remains the UK’s number one export market, the tariffs under the Trade and Cooperation Agreement (TCA) that governs trade between the UK and EU are a looming issue for auto traders.

A deal in late December between diplomats avoided a ‘cliff edge’ of tariffs, but has only delayed this until 2027. Other trading requirements still exist, including the always tricky topic of rules of origin.

Williams said that rules of origin remain one of the most “complex” subjects in customs, with a variety of exemptions or additions, and no ‘one-size-fits-all’ answer.

“When it comes to the automotive industry, there have been specific allowances within the Trade and Cooperation Agreement for the automotive industry, such as bilateral accumulation. Our max-non percentages within the EV world are not as favourable long term.

“I really do think that the automotive industry is something that we need to cherish within the UK and the EU. It's certainly a larger percentage of our manufacturing.

“We have a high-quality product with that we use and produce within the UK and that we sell to the EU, so we have to protect that as much as possible.”

Issues foreign…

In addition to a possible cliff-edge with its biggest trading market, the industry faces further challenges over the next few years.

Although supply chain shortages have eased in some areas, such as semiconductors, sourcing raw materials for battery production is proving to be a modern challenge.

Refineries of critical minerals like cobalt, lithium and copper – that the electric transition is heavily realiant on – are concentrated in a few key countries, such as China, Peru and Australia.

The industrial strategies of key trading partners, such as the US and EU, can also create a challenging environment, says Marongiu.

…and domestic

Delivering net zero “has significant impacts on the automotive sector”, said Marongiu.

“The zero emission vehicle mandate essentially requires an increasing number of zero emission vehicle sales from now on.”

Earlier this year, the government announced that 80% of new cars and 70% of new vans sold in Great Britain must be zero emission by 2030. This will increase to 100% by 2035.

To the complete phase out of new internal combustion engine vehicles by 2035, “80% of new vehicle sales must be zero emissions by 2030,” says Marongiu.

“So, a particularly steep curve can create opportunities for those that are already ahead and challenges for those that are lagging behind.”

This is the fourth IOE&IT SIG launched since early last year, with the three pre-existing groups being based around export controls, food and drink and manufacturing.

You can sign up for future sessions here.