Investment in UK auto sector "on an unprecedented scale"
Organisations like the Manufacturing Advisory Service have a key role in ensuring suppliers are aware of the opportunities at companies like JLR.
The UK’s auto sector is experiencing investment on an unprecedented scale, on the back of a major upturn in auto assembly in the UK – up by over 50% from a low point of around a million cars in 2009 - combined with changes in economic fundamentals which are encouraging firms to build more cars here and to source more components locally.
Remarkably, over £7bn has been invested by major auto assemblers over the last 3 years, with more to come in the supply chain. The latest evidence of this comes this week with Jaguar Land Rover (JLR) opening its new engine manufacturing centre (EMC) near Wolverhampton. The new plant will cover 775,000 square feet (the size of eight football pitches) and when fully up and running will employ 1600 workers.
The halls for components manufacturing and assembly of the new ‘Ingenium’ diesel engines are already completed and are being readied for full production early next year. The new diesel engines will go into the recently unveiled Jaguar XE compact executive saloon. Work is still progressing on a 250,000 square foot petrol engine assembly hall.
The EMC is located at the i54 business park, in the Black Country’s enterprise zone, which means that it qualified for enhanced capital allowances, helping JLR undertake big investment in plant and equipment.
The location makes a lot of sense. Just off the M54 motorway, the site is close to JLR’s assembly plants in the Midlands and on Merseyside. It means that engines can be transported quickly to JLR’s Castle Bromwich, Solihull and Halewood plants.
JLR currently buys engines from its previous owner Ford, but with JLR production being ramped up, it has struggled to source enough engines from Ford’s UK engine plants. JLR wants more strategic control over the supply of its engines, and has the in-house engineering skills needed to develop and build engines.
JLR needs more engines as sales and output are up, with Land Rover and Range Rover leading the sales surge, especially in emerging economies like China. Range Rover in particular offers both a status symbol for the emerging middle classes in such countries, while the ruggedness of the cars also helps in what can sometimes be challenging environments. Meanwhile, the new XE and a possible Jaguar crossover are set to dramatically increase the brand’s output.
JLR sold 425,000 vehicles globally in 2013. That’s small compared to the likes of BMW (already selling 1.8m+ cars per year). Even if JLR doesn’t need the same scale as it sells at a higher premium, longer term it still needs bigger volumes to generate the cash for new model development. To that end, JLR aims to expand output to 1 million by the end of the decade.
Looking forward, the firm’s new models were shown at the recent Paris motor show. The Jaguar XE and Land Rover Discovery Sport are next off the blocks, to be followed by a Jaguar crossover and a replacement for the iconic and venerable Land Rover Defender.
New models and more output means more engines, hence the new engine plant near Wolverhampton. The latter is a welcome boost in terms of new jobs and investment, but is also a hugely welcome commitment in the region when the firm is expanding globally (with investments in China, India and Brazil). It’s a sign that the region still has a rich skills and research base on which to draw. Put simply, making engines here makes a lot of sense for the firm.
The engines will comprise a range of low carbon four cylinder petrol and diesel engines. Making their cars more fuel efficient with lower carbon emissions is critical for JLR. Consumers want more fuel efficient cars given the high prices of petrol and diesel, while a tough new emissions regime in Europe will mean that car firms producing polluting gas guzzlers will be fined in the near future.
Hence the push to cut emissions through lighter weight body panels featuring more aluminium and more efficient engines. The new range of engines being made at the EMC will increase JLR's capability to offer high-performance engines while still making big cuts in emissions.
The new plant will require components from the auto components industry in the region, creating jobs in the supply chain. While some media reports have whipped up hopes of 4000+ jobs overall at JLR and in the wider economy, the reality is likely to be a smaller but still welcome figure of 2000-3000 jobs.
Of course that figure will depend on how much JLR will source locally. JLR itself has simply said – realistically – that ‘hundreds’ of jobs are likely to be generated in the wider economy. This is of course very good news, and as many as 150 suppliers in the region could benefit from the new plant.
Suppliers with expertise in areas such as gears and engine controls, right through to specialists in castings, valve systems and fluid transmission could all benefit. And on engine development the region has excellent engineering strengths in terms of research – think for example of our excellent universities.
Making sure that the supply chain can gear up so it can maximise the benefits of the new plant is critical, and organisations like the Manufacturing Advisory Service have a key role in making sure that suppliers are aware of the opportunities at JLR and what they need to do to take advantage of the situation. Access to finance and making sure workers have the right skills are key.
So, while some recent media reports are well wide of the mark in terms of the multiplier effects of the JLR investment, those benefits are still very substantial and there is work to be done on bringing more of these supply-chain jobs to the region.
It’s an exciting time for the car industry locally, and a very welcome boost given the wider problems that the UK economy faces in trying to ‘rebalance’.
The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of The Information Daily, its parent company or any associated businesses.
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