Is the sun setting on global automotive?

I feel fortunate to have spent most of my working career in a period when the automotive industry and the world at large have been pursuing a path of globalisation.  As a car enthusiast I can look back or see at classic car shows examples of products that were very much a reflection of the culture of a specific country and a particular set of engineers.  The world would be a poorer place if we did not have the ‘yank tanks’ of the 1950s and 60s or cars like the Citroen 2CV or the DAF Daffodil.  Some would argue that globalisation has therefore been a negative force resulting in attempts to produce world cars, best represented perhaps by the Ford Mondeo whose name was even inspired by that global ambition.

We have already seen signs of some roll back of globalisation with General Motors withdrawing completely from the Indian and European markets, Ford stopping manufacturing both in India and Brazil, Suzuki exiting the US market and Renault exiting the Chinese passenger car market.  The driving force behind these decisions was fundamentally an economic one – that these different players were unable to build a profitable business given their product fit and under-achievement of their volume ambitions.  But in the last couple months and even couple days, we have seen changes that might accelerate that break away from taking a worldview – namely the imposition of tariffs on Chinese built BEVs in the EU and the election of Donald Trump who is proposing the imposition of tariffs on all imports, changes to the North American free trade agreement and presumably a carryover of the Biden administration’s proposed restrictions on Chinese componentry and software being included in cars sold in the US market.  Shares in European OEMs who are exposed to this have taken a battering as a result.

As a British citizen, I have had a front-row seat to observe the effect of these trends.  If I want to see the products of a truly ‘British’ car manufacturer, I have to go to a car museum or the tiny (but highly capable) operation of Ariel producing 100 cars annually.  Everything else (including almost all of the sites that I worked at earlier in my career) has gone, mainly replaced by logistics parks, or under foreign ownership – including those quintessentially ‘British’ brands like Aston Martin and Morgan.  We still do a great job of designing and producing some amazing cars for foreign shareholders, but even that is now threatened by another example of the reversal of globalisation – Brexit.  Rather than export cars, the UK now exports people, with skilled expatriates working in probably every leading manufacturer around the world, including many of the Chinese, and a continuous flow of would-be car designers from many nations completing their studies at Coventry University, my alma mater, when the only vehicle production left in that city is LEVC, the now-Chinese owned manufacturer of the London taxi.

Despite all that, I believe in globalisation.  The trend over many centuries has been for communities to come together both physically in ever-larger towns and cities, and in terms of citizenship as quarrelling tribes and kingdoms found ways to co-exist in ever-larger states.  That does not restrict the opportunity to be a proud Scot, as well as British and (in my mind at least) European.  Similarly having open trade in automotive, does not stop me making a choice for one brand over another as long as that brand has found a way to remain competitive in terms of quality, technology and value for money (the downfall of the traditional British motor industry).  To my mind, competition is good, protection is bad, and the role of governments, whether in the UK, EU, US or China is not to build barriers, but to develop enlightened policies that support their national industries in the context of a global industry.  We may not like the outcome, but when the Chinese Government launched their New Energy Vehicle Policy in 2012, other governments could have done the same.  Given that established OEMs had a head start in terms of automotive engineering and manufacturing skills, they might even have beaten the Chinese at the same game.  But the only person with that foresight at the time was Elon Musk, and Tesla is the result of his determination over the last fifteen years.

Travel and the media have given us all a much better-informed view of the world, and I consider myself fortunate to have had the joy (and occasional frustration) of working in many different countries with people of a very different backgrounds to me.  Many of my personal stand-out experiences have been in those situations, and I still have a sense of wonderment that the combination of global enterprises and converging behaviours and expectations, with digitalisation that made it so much easier to communicate, share and execute, made the whole thing possible.  I am not an economist, but my expectation is that a reversal of globalisation will drive up costs, provide only temporary protection of national interests, and result in weaker domestic businesses who relax behind their shelter, rather than get match-fit.

I therefore hope that whilst globalisation may now be going behind a cloud, the sun will emerge again, and our industry can get back to doing what it does best – a facilitator of mass mobility, a driver of change and innovation and a source of relative wealth for employees, investors and nations.