Fastest growing automotive export markets are now outside Europe

In this latest series of blogs, we take a deep dive into some of the UK’s most important sectors using our UK trade briefing report.  Here we look at the UK’s automotive sector.

This report was prepared in collaboration with Global Trade Review (GTR) and it reveals that three out of the top five fastest growing export markets for the UK automotive sector are outside Europe.  These markets include the USA, Japan and Australia where UK exports are growing at 4.3%, 3% and 2.6% respectively (see figure one) 

The Netherlands and Italy make up the remaining top five where exports are expected to grow at 4.3% and 2.1% per year to 2021.

Figure one: the UK’s fastest growing markets for automotive exports

Rank (fastest growing)

Market

Growth rate a year to 2021 (%)

Value in 2017 (US$)

Project growth per year (value US$)

1

The Netherlands

4.3%

$2.3bn

$98.9m

1

USA

4.3%

$10.7bn

$460m

3

Japan

3%

$1.1bn

$33m

4

Australia

2.6%

$1.2bn

$31.2m

5

Italy

2.1%

$2.6bn

$54.6m

Total

 

 

$17.9bn

$677.7m


In all, automotive exports to these five markets were worth $17.9bn last year.  The projected growth could generate an extra $677.7m a year for UK exports to 2021. 

The research also shows that at $54.7bn the automotive sector is the second largest export sector by value in the UK behind machinery and components, at $55bn. 

Automotive exports as a whole are expected to grow by more than 1.7% annually to 2021.  This makes the UK the fourth fastest growing automotive exporter globally, behind Mexico, China and Spain respectively.

Driving ahead

The research highlights how important the automotive sector is to the UK economy and within UK manufacturing.  The companies in the sector account for £104bn in turnover, created nearly 340,000 direct jobs and a further 814,000 in the whole sector value chain in 2017.

UK automotive imports were worth $85.6bn in 2017 – an increase of more than $5bn from 2016.  The UK imports an estimated 42% of the value of the cars it exports and has a large trade deficit in the automotive sector. 

Looking at components in more detail, the UK has a trade deficit in gear boxes, dashboards, brakes, windscreen glass, rev and speed monitors, and bumpers and bumper parts. Only in radiators and engines does the UK export roughly what it imports.

The situation is similar for powertrain and assembly components where the UK has a deficit across all areas other than car seats where there is a modest surplus.  Parts in deficit are safety belts, chassis with engines, silencers and exhausts, car bodies, suspension and shock absorbers, tyres, steering wheel and columns, and drive axels. 

Risks ahead

The research shows that the biggest threat for the sector is that of US trade tariffs.  The UK has a surplus in automotive trade with the US and tariffs may endanger the projected growth in the sector.

Second, the UK’s exit from the EU poses a risk given the automotive industry’s supply chains are international in nature.  But, as this research shows, there are signs that markets and supply chains outside of Europe are developing and this may offset any disruption within the EU. 

What’s more, the global economy as a whole is set to grow and this is likely to increase the demand for cars, benefiting the industry in the UK.

Given the current environment, it’s important the sector’s businesses are well placed to take advantage of new opportunities.

But in order for companies to do this, they need working capital. 

It is only by providing better access to funding that we can support businesses to trade, grow and create jobs.

To read more about the research, please see our UK trade briefing report: https://www.wyelandsbank.co.uk/uk-trade-briefing-2018/   

 

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This research was initially published in our UK trade briefing 2018 report, on which this blog and the data within is based.  The sources for the research include the United Nations, Eurostat, the OECD and customs and excise data as well as UK Office of National Statistics data. The analysis is based on the trends and patterns in trade flows which it projects forward.  It does not account for potential political or policy changes.

The information in this article is not the opinion of Wyelands Bank but based on the research commissioned and data provided by Global Trade Review in March 2018

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