Global and external influences on the car market. Flashcards
How has the pandemic affected the growth of car sales?
Just 1.63 million vehicles were registered in 2020, the fewest since 1992, data from the Society of Motor Manufacturers and Traders (SMMT) showed. It was a 29% fall compared to the previous year - the biggest annual slump since 1943, a time when British industry was repurposed for the war effort.
That represented a loss of £20.4bn in turnover.
- The car sector was particularly badly hit in April, the first full month of national lockdown when sales fell by 97%.
What did covid do to the level of production?
UK car production is down -29.3% as coronavirus slams brakes on the sector. UK car manufacturing output falls -29.3% in 2020 to 920,928 units, the lowest total since 1984. Production for UK and overseas markets declines -30.4% and -29.1% but more than eight in 10 cars still head abroad.
How has Brexit affected protectionist barriers?
- Tariffs of up to 4% on car parts would be imposed. 70% of UK cars are imported from the EU, so most cars would be subject to these tariffs. The list price of many new vehicles could increase by hundreds or even thousands of pounds, accounting for these increased costs.
- 70% of cars sold in the UK are imported from Europe. In 2020, despite some manufacturers introducing price protection schemes, Brexit uncertainty and coronavirus saw a total of 1.63 million cars sold, 29% less than in 2019.
What is the price of fuel prices?
The latest average fuel prices, as of 16 January 2023, are 148.73p for petrol and 170.98p for diesel, according to the RAC.
What impact has increased fuel prices had on the UK car market?
Fewer people are using their cars so demand can be argued to decrease.
How has productivity impacted the car industry?
In 2020, UK car production fell by -29.3% (around 380,000 units) to 920,928 units, its lowest level since 1984. This loss was estimated to have a factory gate value of more than 10 billion. The UK automotive sector strengthened its focus on producing battery electric vehicles. Production of these vehicles rose to an 18.8% share of all cars produced in Britain, up from 14.8% in 2019.
What three factors can lead to a fall in productivity?
- Supply chain shortages
- Pandemic/ Covid
- Brexit/ Uncertainty
What effect has the underutilisation of capacity had in the car industry?
Pricing below capacity means that some costs may not be covered. Europe has enough assembly plants to build 22 million cars a year, in 2022 this fell below 15 million. Some plant utilisation is at just 60% which is too late for a company trying to find cost savings on multiple models.
What are the reasons for global mergers or joint ventures?
- To spread risk over different countries or regions.
- To enter new markets or trade blocs.
- To acquire national or international brand names or patents
- To secure resources and supplies so that production is not interrupted.
- To maintain or increase global competitiveness.
What is a joint venture?
Is a commercial enterprise undertaken jointly by two or more parties which otherwise retain distinct identities, this is only temporary.
- They can operate but remain to separate businesses.
What is a merger?
Two businesses come together to form one, on a permanent basis.
What is an example of entering new markets of car businesses?
China has laws that only permit foreign automakers to operate in the market for a joint venture with a local company. BMW have a joint venture with a company called Brilliance China Automotive. Large state-owned enterprises SAIC Motor and FAW group have multiple joint ventures with foreign automakers. That makes them much stronger than brilliance, a privately owned company essentially dependent on BMW for its profits.
What has the role of Africa been in the car industry?
- Africa has a comparative advantage in land and raw materials, but it underperforms in manufacturing.
- The market for cars is growing rapidly in Africa but historically were supplied mostly through imports.
- MNC manufacturers currently setting up in Angola, Ethiopia, Ghana, Kenya and Nigeria.
Foreign companies holding more than… share in UK companies.
10%
What are the influences of exports on the car industry?
- In September 2022, 77.6% of the cars are produced in the UK or exported to other countries.
- Over the whole of 2022, the export amount is even higher at 78.6%.
- Electric cars make up 37.4% of all exports.
