THE SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED SMMT, the ‘S’ symbol and the ‘Driving the motor

industry’ brandline are trademarks of SMMT Ltd

SMMT Open Forum

Cranmore Park, Solihull

15 October 2015

Supported by

2 THE SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 2

Mike Mychajluk

Supply Chain & External Engagement Manager, Government

Programmes

Jaguar Land Rover

The Automotive Council…

continuing the acceleration

www.automotivecouncil.co.uk

Michael Mychajluk

Jaguar Land Rover &

Supply Chain Group

UK Automotive Industry in Celebration

• £14 billion of investments confirmed & in progress • Leveraged from c.£0.5 billion of Government incentives • 80% of our cars exported • Creation of 50,000 OEM & Tier 1 jobs • Potentially another 50,000 within automotive SMEs

Period of Great Growth and Real Momentum Building

BUT - Brazil, China & Russia – Exchange Rates – EU Uncertainty

The UK Passenger Vehicle Automotive OEM Production Footprint - with 6 out of 6 major players having confirmed investments

Mix of UK production, number of vehicles in thousands 2014 – 1.57 Mils Units (1% Growth Rate), SMMT 2015 Forecast Strong Positive Growth

Source: SMMT

Compact Midsize Premium/Large/SUV Sports Taxi Sub-compact

285 Qashqai

2015 Infiniti

2014 Manufacturing vs 2013 was relatively flat due to mostly model replacement activity ilo whitespace vehicles Most of the major automotive OEMs have an investment interest in the UK

Jagu

ar

Lan

d

Ro

ver

450 N

issa

n

500

83 Leaf & Note

132 Juke

17 Bentley

AML Morgan

180 Mini

4 Rolls Royce

Vau

xhal

l

172

140 Auris

32 Avensis

Oth

ers

24

3 MG

Ho

nd

a

121

Toyo

ta

122

68 Civic Jazz

54 CRV

BM

W

184

78 Astra

43 Vivaro

11 F-Type

375 Range Rover

Range Rover Sport Range Rover Evoque

Discovery Sport Discovery Defender

Freelander

3 Lotus

1 LTC

64 XJ XF XK

+ 2015 XE & F-Pace

7 7

Britain’s Car Makers Unite for Frankfurt International Motor Show Send-off

7

• 10 British-built cars joined by Business Secretary Sajid Javid and industry leaders in Greenwich before flying the UK flag at Frankfurt International Motor Show

• Event organised by SMMT, No. 10 GREAT team, AIO and BIS • Approximately 70 media personnel in attendance • At the show, 15 business meetings held, 150 in attendance at our reception -

aimed to promote the GREAT British automotive industry

Automotive Council UK

The Automotive Council was formed in 2009 under Labour; our Sector flourished

under Liberal Dem/ Conservative Coalition; entered a new era with the

Conservatives:

To strengthen and promote sustainable growth of the automotive sector in

the UK through enhanced dialogue and co-operation between UK government

and automotive industry

New Government

New Leadership

New Industry Chair

Nigel Stein

CEO - GKN PLC

Expectations

• Need to deliver more for less

• Greater devolved Government - Northern Powerhouse, Midlands Engine

• Government will continue to actively support the Automotive Industry – open door

Automotive Council UK

A continuous value creation cycle involving all facets of the Automotive Council

Approach: Structure:

Supply Chain

Business Environment

& Skills

Technology

Workstreams

Business Environment & Skills Group

The group has the following work streams:

Main Aims

• Optimise business environment for the UK automotive

sector

• Address skills challenges facing the sector

Group Chair: Tony Walker, Toyota UK

Skills

Business

Environment

UK International

Competitiveness

Europe

UK International

Competitiveness

Skills

Key Objectives:

• Analyse UK’s international competitiveness

• Create objective set of KPI’s to judge

attractiveness for foreign investment

• Determine ‘killer facts’ to demonstrate UK’s

competitive advantage

R&D Tax Relief R&D Tax Relief Governance & Political StabilityKPI: Hourly Labour Cost (all sectors) - Eurostat KPI: Survey - Global Competitiveness Report Auto Council / PwC Research KPI: Ave. of 6 indicators, Worldwide Governance Indicators

6 6 1 1 5 15 2 4 2 4

10 10 10 25 8 21 8 21 11 25Perception Perception SMEs Perception Perception

Strong Strong Strong Strong

Weak Weak Weak Weak

Weak

Labour Productivity Availability of Engineers University / Industy Collaboration Investment in R&D by GovernmentKPI: Apparent labour productivity* - Euostat KPI: % Graduates in science, engineering, manufacuring - UNESCO KPI: Survey - Global Innovation Index Gross Expenditure on R&D by Government - GII*

1 1 11 14 1 2 6 13

10 10 11 17 11 25 11 24Perception Perception Perception Perception

Strong Strong Strong Strong

Weak Weak Weak Weak

GlobalEUCU Global

Labour cost Labour Flexibility

EUCU Global EUCU Global

Note: data sourced from Eurostat so global rank = EUCU rank

Large Companies

2.9 4.1 3.4 3.65

UK labour cost is competitive in Western Europe and -

while relatively high globally - is compensated by strong

productivity and flexibility. Case for high productiv ity

in Automotive should be made consistently.

Key competitive advantage for the UK. This is

recognised by business leaders. Flexibility allows rapid

hire of high-value add workers at speed. Other countries

are noting UK strength - need to monitor and take

action to maintain advantage long-term

UK strength in institutions and rule of law is a

key asset. Future stability in EU a concern; auto

industry and government should work together

towards positive renegotiation and make clear

message to global corporate leaders

UK scheme design

highly competitive.

However split "Large" /

"SME" reduces

competitiveness for

supply chain.

SMEs

EUCU Global EUCU

EUCU Global EUCU Global EUCU Rank RankGlobal

Despite reports that UK's overall productivity is low,

automotive productivity is class leading.

Investment in automotive supply chain will return

increased productivity for UK.

High concern area in perception and actual. Key

issues are number of engineers completing practical

education, then pursuing engineering careers .

Concerted effort by industry, universities and

government to incentivise engineering careers

Highlighted as key to investment decisions in

R&D. UK is weak middling in boh EUCU and

globally - but schemes like AMC indicate that

investment can provide significant returns

2.8 2.15 3.8

*GVA per person employed, €000

UK universities are regarded as key asset for UK

due to reputation for high quality research and

collaboration. Should continue to develop

initiatives to enable transfer from research to

industrial application.

3

0 5 10 15 20 25 30

BrazilUS

AustraliaUK

PolandCzech Republic

TurkeyItaly

Slovak RepublicSpain

GermanyFrance

RomaniaBulgaria

JapanMexico

South Korea

0 10 20 30 40 50 60 70 80 90

BulgariaSlovak Republic

NigeriaRomania

PolandRussia

ItalyTurkey

ThailandSpainBrazilIndia

MexicoCzech Republic

ChinaFrance

IndonesiaSouth AfricaSouth Korea

CanadaJapan

AustraliaGermany

UKUS

-1 -0.5 0 0.5 1 1.5 2

ChinaIndia

IndonesiaThailand

MexicoTurkey

BrazilBulgaria

RomaniaSouth Africa

ItalySlovak Republic

South KoreaSpain

PolandCzech Republic

FranceUS

JapanUK

GermanyAustralia

Canada

0 20 40 60 80 100 120

Bulgaria

Romania

Poland

Slovak Republic

Czech Republic

France

Italy

Spain

Germany

UK

0 1 2 3 4 5 6

ItalyIndonesia

South AfricaBrazil

South KoreaSlovak Republic

SpainAustralia

TurkeyThailand

FranceGermany

MexicoCzech Republic

PolandChina

RomaniaIndia

RussiaBulgaria

JapanNigeriaCanada

USUK

0 0.002 0.004 0.006 0.008 0.01 0.012

IndonesiaThailand

NigeriaBulgaria

RomaniaTurkeyMexico

Slovak RepublicSouth Africa

ChinaPoland

UKItaly

JapanCanada

SpainBrazil

Czech RepublicRussiaFrance

AustraliaGermany

USSouth Korea

0 0.1 0.2 0.3 0.4

GermanyPolandTurkey

IndonesiaMexico

South KoreaUK

RussiaJapan

AustraliaCanada

ChinaUS

South AfricaBrazilCzech…Spain

ItalyFrance

ThailandIndia

0 0.1 0.2 0.3 0.4

GermanyPolandTurkey

IndonesiaMexicoRussiaJapanChina

USSouth Africa

AustraliaBrazilCzech…Spain

ItalySouth Korea

CanadaUK

FranceThailand

India

€ 0.00 € 5.00€ 10.00€ 15.00€ 20.00€ 25.00€ 30.00€ 35.00€ 40.00

France

Germany

Italy

UK

Spain

Slovak Republic

Czech Republic

Poland

Romania

Bulgaria

UK International Competitiveness

Relative Weaknesses

• Availability of

Engineers

• Availability of skilled

operators

• Labour cost

• Investment in R&D by

Government

• R&D tax relief for large

companies

Relative Strengths

• Labour Productivity

• Labour flexibility

• University / Industry

collaboration

• R&D tax relief for

SME’s

Analysis of international competitiveness of the UK automotive industry

Recommendations:

‒ To promote the UK’s key strengths

‒ To take urgent action to tackle the UK’s priority weaknesses

The UK ‘s International

Competitiveness

– an Objective Scorecard

For review by Automotive

Council

R&D Tax Relief R&D Tax Relief Governance & Political StabilityKPI: Hourly Labour Cost (all sectors) - Eurostat KPI: Survey - Global Competitiveness Report Auto Council / PwC Research KPI: Ave. of 6 indicators, Worldwide Governance Indicators

6 6 1 1 5 15 2 4 2 4

10 10 10 25 8 21 8 21 11 25Perception Perception SMEs Perception Perception

Strong Strong Strong Strong

Weak Weak Weak Weak

Weak

Labour Productivity Availability of Engineers University / Industy Collaboration Investment in R&D by GovernmentKPI: Apparent labour productivity* - Euostat KPI: % Graduates in science, engineering, manufacuring - UNESCO KPI: Survey - Global Innovation Index Gross Expenditure on R&D by Government - GII*

1 1 11 14 1 2 6 13

10 10 11 17 11 25 11 24Perception Perception Perception Perception

Strong Strong Strong Strong

Weak Weak Weak Weak

GlobalEUCU Global

Labour cost Labour Flexibility

EUCU Global EUCU Global

Note: data sourced from Eurostat so global rank = EUCU rank

Large Companies

2.9 4.1 3.4 3.65

UK labour cost is competitive in Western Europe and -

while relatively high globally - is compensated by strong

productivity and flexibility. Case for high productiv ity

in Automotive should be made consistently.

Key competitive advantage for the UK. This is

recognised by business leaders. Flexibility allows rapid

hire of high-value add workers at speed. Other countries

are noting UK strength - need to monitor and take

action to maintain advantage long-term

UK strength in institutions and rule of law is a

key asset. Future stability in EU a concern; auto

industry and government should work together

towards positive renegotiation and make clear

message to global corporate leaders

UK scheme design

highly competitive.

However split "Large" /

"SME" reduces

competitiveness for

supply chain.

SMEs

EUCU Global EUCU

EUCU Global EUCU Global EUCU Rank RankGlobal

Despite reports that UK's overall productivity is low,

automotive productivity is class leading.

Investment in automotive supply chain will return

increased productivity for UK.

High concern area in perception and actual. Key

issues are number of engineers completing practical

education, then pursuing engineering careers .

Concerted effort by industry, universities and

government to incentivise engineering careers

Highlighted as key to investment decisions in

R&D. UK is weak middling in boh EUCU and

globally - but schemes like AMC indicate that

investment can provide significant returns

2.8 2.15 3.8

*GVA per person employed, €000

UK universities are regarded as key asset for UK

due to reputation for high quality research and

collaboration. Should continue to develop

initiatives to enable transfer from research to

industrial application.

3

0 5 10 15 20 25 30

BrazilUS

AustraliaUK

PolandCzech Republic

TurkeyItaly

Slovak RepublicSpain

GermanyFrance

RomaniaBulgaria

JapanMexico

South Korea

0 10 20 30 40 50 60 70 80 90

BulgariaSlovak Republic

NigeriaRomania

PolandRussia

ItalyTurkey

ThailandSpainBrazilIndia

MexicoCzech Republic

ChinaFrance

IndonesiaSouth AfricaSouth Korea

CanadaJapan

AustraliaGermany

UKUS

-1 -0.5 0 0.5 1 1.5 2

ChinaIndia

IndonesiaThailand

MexicoTurkey

BrazilBulgaria

RomaniaSouth Africa

ItalySlovak Republic

South KoreaSpain

PolandCzech Republic

FranceUS

JapanUK

GermanyAustralia

Canada

0 20 40 60 80 100 120

Bulgaria

Romania

Poland

Slovak Republic

Czech Republic

France

Italy

Spain

Germany

UK

0 1 2 3 4 5 6

ItalyIndonesia

South AfricaBrazil

South KoreaSlovak Republic

SpainAustralia

TurkeyThailand

FranceGermany

MexicoCzech Republic

PolandChina

RomaniaIndia

RussiaBulgaria

JapanNigeriaCanada

USUK

0 0.002 0.004 0.006 0.008 0.01 0.012

IndonesiaThailand

NigeriaBulgaria

RomaniaTurkeyMexico

Slovak RepublicSouth Africa

ChinaPoland

UKItaly

JapanCanada

SpainBrazil

Czech RepublicRussiaFrance

AustraliaGermany

USSouth Korea

0 0.1 0.2 0.3 0.4

GermanyPolandTurkey

IndonesiaMexico

South KoreaUK

RussiaJapan

AustraliaCanada

ChinaUS

South AfricaBrazilCzech…Spain

ItalyFrance

ThailandIndia

0 0.1 0.2 0.3 0.4

GermanyPolandTurkey

IndonesiaMexicoRussiaJapanChina

USSouth Africa

AustraliaBrazilCzech…Spain

ItalySouth Korea

CanadaUK

FranceThailand

India

€ 0.00 € 5.00€ 10.00€ 15.00€ 20.00€ 25.00€ 30.00€ 35.00€ 40.00

France

Germany

Italy

UK

Spain

Slovak Republic

Czech Republic

Poland

Romania

Bulgaria

The ‘UK International Competitiveness’ Study

Approaching Release.

Skills

• To provide the pipeline of skills / talent needed now and for the future

• industry / government joined forces to form the Automotive Industrial Partnership.

• Launched March 2015, The Partnership will support the delivery of the skills roadmap:

Investing

•Boost skills

• Inspire the next

generation

•Create new routes into

automotive careers

Unified cross- government and industry effort to deliver a skilled auto industry workforce for now and for the future.

Basic Skills Apprenticeships Graduates People in Work New Growth

Technologies

• Early Completion March 2016.

• Look for a devolved delivery of the skills roadmap from next year.

Supply Chain Group

The group has the following work streams:

Main Aims

• Establish challenges facing the UK automotive supply chain

and Improving supply chain long-term competitiveness

• Maximise business opportunities for suppliers improving

access to finance for the supply chain

Capitalising the UK

Business

Opportunities

Long-Term

Competitiveness

Satisfying

Demand Through

FDI

Access to Finance

Innovation and

Premium

Manufacturing

Group Chair: Dave Allen, Jaguar Land Rover

Access to Finance

Capitalising the

UK Business

Opportunities

Supply Chain Group – Enabling Growth

Actions:

LTASC Programme. Investment in CapEX, R&D, and Skills. (AMSCI funded) = 38 suppliers/ £10 Mils Grants/ £40 Mils Investments/ 1,500 jobs

Luxury and niche vehicle suppliers. Meet the Buyer event at Williams, Automechanika in 2016 (Next Opportunity to Celebrate?)

Tooling finance. Addressing No 1 access to finance issue for automotive, 30% growth in bank lending to the sector.

Publications. Providing direction to industry.

Context:

£6 billion opportunity. OEMs and Tier 1.

Productivity. UK automotive No 1 in Europe (GVA per employee).

Automotive Investment Organisation. Expert support for re-shoring high value commodities. AIO portfolio has delivered 14,000 jobs to date.

Investment & Growth. £2Bn of supply chain investments in the last 5 years generating 25% employment growth & 40% revenue growth, for example: Automotive Insulations; Borg Warner; Brose; Lear; Magal; Plastic Omnium; Sertec; VTL

SMEs. Strong trickle down growth for UK’s SMEs, for example: Cameron Price; DMS Chromium Plating; Petford Tools.

Research. End-to-end understanding of OEM and Tier 1 demand and capability of smaller suppliers.

Supply Chain Group – Happy Suppliers

• The UK OEM’s are buying more from UK tier-1 suppliers, with growth in the proportion of UK content amplified by a growth in vehicle output

• We estimate that UK tier—1 content is now around 41% in value terms • There are no data points to benchmark UK local sourcing with our peers: we

believe 60% is a likely figure for Germany • Auto parts turnover currently around £11.6B annually • Sales to UK customers around £9.5B annually • This is a 49% increase on 2011

The Latest Supply Chain Group report

• Automotive Council continues to be a key architect in progressing UK automotive industry

agenda on Business, Skills, Supply Chain & Technology

• Progress evident in all work streams impacting Policy, Investments and activities.

Conclusions

Automotive Council now actively seeking out future challenges to

supplement our work in the future……

• Advanced Propulsion Centre [APC]

– ’hubs & spokes’ • Automotive Industrial

Partnership (Skills) • Automotive Investment

Organisation [AIO] • Academic ‘Challenge

Networks’

• ‘Travellers Needs & UK Capability’ Study • International Competitiveness Scorecard • Connected to the Banking Sector,

Industry incl. Suppliers, Government & Universities

• ‘Sticky’ Technology Roadmaps • 2013 Automotive Industrial

Strategy • IM-PACT UK & Connected Vehicles

competition

Thank You

www.automotivecouncil.co.uk

Society of Motor Manufacturers and Traders Limited

71 Great Peter Street, London SW1P 2BN

www.smmt.co.uk

THE SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED

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