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G&H Blog Future Auto Part1

The future of Auto: How will Brexit and government policy affect automotive?

G&H Blog Future Auto Part1 2
Over the next two blogs we’ll be looking at some of the big changes impacting the automotive industry and assessing how they will shape the future of the industry. In the first part, we look at Brexit and government policy.

The automotive industry is in a state of becoming; quite an odd place for one of the world’s largest and most high-profile economic sectors to find itself in.

For long periods the biggest change we might have seen in the automotive sector would have been the launch of a new range of models or, at most, a new product segment. But now we live in a world where the changes are about new forms of propulsion, new modes of transport and travel infrastructures and new attitudes to vehicle ownership. We are witnessing a paradigm shift.

Anyone involved in this process inhabits a world of challenge and change, of frustrating limits and exciting opportunities to smash them, of a race to make the next big breakthrough. But it’s also an era of collaboration as we recognise that this new world is just too big for any one of us to tackle alone.

Here’s what we’ll be keeping an eye on this year – the events and phenomena that could impact the ever-changing industry we love.


Brexit will create challenges and opportunities for automotive. From listening to our clients it’s clear to us that Brexit has already contributed to the skills shortage within our sector. We’ve seen a significant downturn in British automotive firms taking on skilled engineers from across Europe as employers wait to understand the implications of Brexit on hiring foreign talent. And they can’t assess those implications until they know what kind of Brexit they’ll get.

This downturn in hiring has affected not only routine hires, but highly-skilled individuals in technical roles. The jobs haven’t gone away – in fact, as vehicle technology becomes more complex, there is a high demand for skilled mechanical, electrical, embedded software and controls skill sets. The talent from Europe (particularly Italy) that can fulfil these roles has never been cheap, and is still available, but the demand for European workers has slowed noticeably. This is not so much the case in Formula 1, which has a long tradition of recruiting from a global talent pool, in more manageable numbers. 

But the smart hirers will recognise that even bad news is better than no news; hirers need to understand the boundaries that Brexit will place upon them in order to work with those boundaries. Parliamentary stasis is the enemy of industry and businesses across the sector are keen to know where they stand. Unquestionably, the UK’s current impasse over Brexit is slowing business for UK auto.

Japan is a key player in the future of car manufacturing in the UK, with successive British governments working hard to ensure we remain an attractive and accessible centre from which its big manufacturers can trade. Between them Toyota, Nissan and Honda build about fifty per cent of the UK’s cars and rely on our free trade with the European Union to facilitate the rapid movement of parts across their supply chain. Our trade with Europe suits Japanese Just-In-Time production methods, and any barriers to production could signal the end of our usefulness to the country’s big automakers. Japanese ambassador Koji Tsuruoka has warned that Japanese companies would leave Britain if trade barriers made them unprofitable, while Japanese Prime Minister Shinzo Abe has spoken plainly of his belief that a no-deal Brexit deal could be disastrous for future trade

Japanese automotive car manufacturers employ many thousands of people in Sunderland, Derby, the Midlands and the South West. Without a clear picture of the future, these business will review their operations. Honda is already planning to shut its British facilities for six days in April to allow production to recover from any delays on parts at borders after Britain’s exit from the EU, stockpiling parts for a smoother manufacturing process.

Though an unfavourable Brexit could see Japanese manufacturers move their operations elsewhere, taking thousands of jobs with them, all this is currently unknown – what all manufacturers agree on is that they need to know where they stand.

Brexit could bring opportunities too. Currently focused on finding talent within the EU, the UK could implement favourable contracts facilitating an influx of the best talent from Japan, India, the USA and Australia, ensuring talented workers are free to come and work here for in-demand roles within engineering/STEM.

Policy, progress and cost

We’re all excited about the rise and rise of electric vehicles, but there are many obstacles yet to full-scale Electric Vehicle deployment. The government has set progressive agendas for electric vehicles but we await to see how it will encourage the development of the infrastructure required to support wholescale electrification.

To get electric vehicles off the ground, so to speak, will require large-scale accessible charging networks. It will also require manufacturers to address the thorny question of unit cost. Currently, the price point of a typical electric vehicle is a barrier to entry for most consumers and a barrier to full scale adoption. Elon Musk made the headlines earlier this month with an announcement to his employees that he is cutting 7% of his workforce. The company needs to recoup costs somewhere, and simply isn’t selling enough vehicles. By Musk’s own admission, Tesla cars are still “too expensive for most people”. The Model 3 is the company’s attempt to break into a new, cheaper market segment, but, as Musk himself admits, “we need to continue making progress towards lower priced variants (of it)”.

Meanwhile, even volume manufacturers like Nissan are struggling to make an electric vehicle at a price point that a low-to-middle-income household can afford. And to revisit a point we made earlier, we still need the charging infrastructure to support large-scale adoption of electric vehicles by the “typical punter”. Where are all the EV-charging lamp-posts?

There’s also a problem with what we might call the perception/reality gap. Electric is good and diesel is bad, right? Actually, not so much. Not yet. If you produce all the energy for new electric vehicles through coal power stations, it defeats the point of electrification for clean air. And, as we discussed in a blog last year, diesel has been a victim of consumer confusion, becoming the villain in public discourse when it might, in fact, be the answer to bridging the gap between the old automotive world and the new. Even after the re-categorisation of diesel, one of our team drives a Nissan Qashqai that has zero road tax. Diesel can be clean and efficient. For countryside driving, small, clean, efficient diesel engines may be the answer we seek. Government subsidies on clean, efficient diesel engine manufacture could be one way to achieve clean air policies while encouraging sector growth, but it might need to come hand-in-hand with a quite a lot of public education after the recent blow to diesel’s image.

From many conversations with industry insiders, we’re pretty convinced that the LCV industry itself still doesn’t know for sure that batteries are the future of propulsion – it just seems like the best available option right now. Plugin hybrid diesels with a small efficient engine and an electric motor for the city could be a better bet. And after huge early investment in R&D, many companies have simply stopped seeking the next big thing and are simply building what they know to be an interim solution. This will play out in 2019 and beyond and we’re a long way from the endgame yet.

In part two, we will discuss battery development, motorsport and why automotive is falling in love with consumer electronics