JLR shutdown highlights pressure on automotive sector

Jaguar Land Rover’s (JLR) Solihull plant has begun a two-week shutdown in what has been described by an industry expert as a ‘short term measure’, as the company, and others in the car manufacturing supply chain, head towards ‘troubled waters.’

Dr Ralf Speth, the boss of JLR again warned that a hard Brexit would lead to the closure of plants and major job losses. He said: “Everybody can do the maths. It is very open and very transparent. It is not only at JLR, but is also an element for the supplier industry and export industry in the UK.”

But Brexit is not the only cloud on the horizon, as demand in China – JLR’s biggest market – has slowed markedly in recent months, as Prof Christian Stadler of Warwick Business School noted: “China is their biggest market, but the Chinese economy is growing at its slowest rate for a decade and the country is embroiled in a trade war with the US. Car buyers in China are worried about making big investments as they are concerned about what the future holds.”

However, Prof Stadler agreed with Speth’s overall analysis that Brexit is potentially hugely damaging for businesses like JLR:”Brexit is another major problem for the company. Car manufacturing is the most integrated industry between the UK and the EU.”

“The supply chain typically crosses the channel six times, back and forth, before a car is finished. If there is a no-deal Brexit and border controls are implemented, it would cause massive disruption.”

On top of all this, Prof Stadler believes that changes in the car market, including calls to bring forward a ban on new petrol and diesel cars by eight years to 2032, is another threat to JLR and similar companies in the UK.

“The move to electric vehicles is a problem for many of the big manufacturers, as it will see new competitors come into the market and eat up the market share. Tesla is an obvious example, but there are many Chinese players, backed by the Chinese government, while the big US tech companies are looking at their own mobility solutions. This will be long-term threats for JLR.”

Carolyn Fairbairn, the director general of the CBI, has added her voice to the chorus of concerns about the state of Brexit negotiations and the widespread feeling amongst her members that they need clarity and stability to grow.

She said: “The situation is now urgent. Unless a withdrawal agreement is locked down by December, firms will press the button on their contingency plans.”

“The knock on effect for the UK economy would be significant. Living standards would be affected and less money would be available for public services, including schools, hospitals and housing.”

A recent CBI survey showed that 80% of companies reported that Brexit had had a negative impact on their investment decisions.”

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