Automotive industry: what is behind the recent closures?

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Honda UK is closing its Swindon plant by 2021, resulting in the loss of about 3,500 jobs. Jaguar Land Rover and Nissan are also reducing their production and jobs. So what's going on?

Honda is a big loss

The Swindon Honda plant is the UK's fourth largest car factory.

Honda Civic sedans are made there. The model was the third most produced car in the UK in 2017, according to the Society of Motor Manufacturers and Traders (SMMT).

The Swindon factory was established in 1985. But in recent years, it has not operated at full capacity, due to declining European demand. This led Honda to suspend a production line with a capacity of 100,000 units in 2014.

Uncertainty about Brexit

Japanese automakers, including Nissan, said the Brexit uncertainty did not help them "plan for the future". Nissan recently chose to build the next X-Trail model in Japan, rather than in Sunderland.

But Honda said the closure of the Swindon factory was not related to the UK's decision to leave the European Union. Restructuring would bring it closer to key markets such as China or the United States.

In a statement, the state secretary for economic affairs, Greg Clark, said that it was a "business decision" for the company.

Manufacturing companies rely on complex supply chains across Europe, allowing them to exchange parts and produce cars "just in time" for deliveries.

Industry figures have suggested that any additional tariffs applied to car exports after Brexit could have a negative impact on business. A tariff is a tax paid on goods crossing borders.

They also called for clarity for the EU's auto workers in the UK. The SMMT estimates that 10% of people employed in the automotive industry come from other EU countries.

Back to Japan

Another agreement concerning car manufacturers is a new trade agreement between the EU and Japan, which came into force in February. Rates on cars exported from Japan to Europe will be reduced to zero over the next 10 years.

In a recent report, consulting firm LMC Automotive estimated that more than 730,000 cars built in the UK in 2018 were destined for Nissan, Toyota and Honda, nearly half of all light vehicles produced.

This could encourage Japanese companies, such as Honda, to reorient jobs and investments in their home country, thereby jeopardizing British car manufacturing.

The director of global production forecasting at LMC also said that if the UK leaves the EU without an agreement, cars made in Japan could, under the new EU-Japan trade deal, cost less to import. in the EU than those produced in the United Kingdom.

Fall of Chinese demand

Indian Jaguar Land Rover (JLR) confirmed in January that it will cut 4,500 jobs, mainly in the UK.

The Asian market faced a different challenge: a slowdown in sales in China.

Wholesale sales of pbadenger vehicles fell 17.7% in one year, to stand at 2.02 million units, according to the latest figures released by the Association of Automobile Manufacturers from China.

For the full year of 2018, sales fell by 4.1% – the first annual decline since the early 1990s.

According to badysts, trade tensions between the United States and China could also make 2019 a difficult year for automakers.

Both countries are engaged in a growing trade war, imposing rights on billions of dollars worth of goods.

S away from the diesel

In 2018, sales of new diesel cars in the UK fell by almost 30%, according to the SMMT.

The government had already introduced tax breaks on diesel cars, when Gordon Brown was Chancellor, but sales have dropped since 2016.

Professor David Bailey, of Aston University in Birmingham, said that fewer diesel cars were purchased for two main reasons: the environment and consumer confusion.

Volkswagen's diesel-gate scandal has shown that many diesel cars produce higher levels of nitrogen oxides (NOx) on the road than in laboratory tests. Nitrogen oxides are badociated with breathing difficulties.

Diesel cars generally produce less CO2 than gasoline vehicles. But with an increased focus on air quality in urban areas and NOx as contributors to pollution in cities, diesel is facing a brutal reaction.

In the UK, diesel cars that do not meet the latest emissions standards are now subject to additional charges, while several European countries, including the UK, have announced in the future a ban on new diesel and gasoline vehicles.

Taking advantage of doubts about the resale value of diesel cars, taxation and where they might be driven, Prof Bailey added that consumer confusion had led to sales.

Electric revolution?

Honda said the decision to close its manufacturing plant in Swindon was linked to the evolution of the auto industry and the need to launch electric and hybrid vehicles.

The global stock of electric cars has reached more than three million in 2017, up from 14,260 in 2010, according to the International Energy Agency.

Jim Holder, managing editor of What Car? British magazine, told BBC News that the UK had played a "relatively weak role" in their production.

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JLR is building the Range Rover Hybrid at its Solihull plant in the West Midlands, while Toyota is manufacturing hybrid versions of the Corolla at its Burnaston plant in Derbyshire.

Nissan manufactures the Leaf electric car at its Sunderland plant. It was the best-selling electric vehicle in Europe in 2018, with 40,000 vehicles manufactured in Sunderland and sold on the continent.

But with vehicle sales in the United Kingdom relatively low, the decline in the value of the British pound and reductions in government subsidies to buyers could spur manufacturers to build electric cars elsewhere, Holder said.

China is generally considered the world leader in the production of electric vehicles, as well as the largest car market.

The Chinese government has encouraged production. And the rules introduced in 2019 prohibited the creation of companies manufacturing only cars with combustion engines.

The new directives also mean that major manufacturers could be penalized for failing to comply with the quotas for zero-emission and low-emission cars.

In September 2018, Prime Minister Theresa May announced a contribution of £ 106 million for the research and development of emission-free vehicles, new batteries and low-carbon technologies.

However, according to the latest figures from the Association of European Automobile Manufacturers, the number of refillable cars consumed by consumers is now below the EU average.

The government said it wanted to make the UK "the best place in the world" to own an electric vehicle.

However, in 2018, it ended subsidies for new plug-in hybrid vehicles and the grant for pure electric cars was reduced from 4,500 to 3,500 pounds.

In a recent report, the Parliament's Enterprise Selection Commission criticized the decision to remove subsidies for cleaner cars, as well as the lack of charging points in the UK.

And with relatively high purchase costs and many unknown factors related to UK charging infrastructure, motorists may need more persuasion to make the change.