Cars are complex. A single vehicle can contain 30,000 individual parts, each of which may require input from five or more suppliers. But Europe’s interconnected supply chain, which makes cross-border manufacturing possible, faces some serious challenges if it is to remain competitive.
Perhaps the greatest is the UK’s planned departure from the EU. Under half of the content of cars assembled in Britain is made domestically. EU exports of parts and accessories to the UK were worth €11.6bn in 2016, according to the European Automobile Manufacturers’ Association. More than 60 per cent of components in the Mini and Rolls-Royce brands, produced by BMW in Britain, are imported from the EU.
If no deal were agreed by the time of Brexit, this could mean tariffs (on average 3 or 4 per cent for automotive parts under World Trade Organisation rules) and customs checks between Britain and the bloc. Such barriers may mean reorganising supply lines to “just in time” schedules, so parts arrive at car plants just hours before being fitted.
“You may get some suppliers of components localising into the UK to support the assembly of cars,” says one consultant. “The biggest issue is probably not tariffs but customs barriers.”
A government push to boost domestic production of car parts increased the amount of home-made content in vehicles to an estimated 44 per cent, up from 36 per cent in 2011. Accelerating this trend will be crucial for mass-market UK carmakers since free trade agreements typically stipulate cars must contain a certain percentage of components from the country of origin.
Suppliers must also be braced for automakers to move away from the UK.
Another challenge is the anticipated shift to electric powertrains, driverless systems and internet-connected cars. Sidney Johnson, senior vice-president for supply chain management at parts supplier Delphi, says there is a “high expectation from [the] automotive industry [it can] introduce quicker…