Analysis: Will UK-China tensions affect Britain's motor industry?
We look at China’s growing influence in the UK car business and how it could change
Political tension between China and the UK has started to affect industrial investment in the UK – the Huawei 5G furore, nuclear power projects and the HS2 railway line being some of the higher-profile examples.
But how will this tension affect China’s car industry investments in the UK, led by Geely, SAIC and Nio? At stake are thousands of jobs and billions of pounds of investment in UK facilities.
“It’s definitely a concern,” said Professor David Bailey of Birmingham Business School. “Government has a new relationship with China and the big question mark is, even if these investments are private Chinese companies, they operate in a country where the state is much more active in day-to-day operations.”
The biggest Chinese investor in the UK is Geely, an industry newcomer that started selling cars in 1997 yet expanded rapidly by buying ‘distressed’ overseas companies: Volvo in 2010 for $2 billion (£1.5bn), Manganese Bronze Holdings (the London taxi maker) in 2013 and Proton and Lotus in 2017. Geely’s decade of ownership of Volvo has been textbook, bolstered by around £8.5bn of investment and delivering a convincing impression of long-term strategy.
In the UK, Geely has more than 2000 employees and a financial commitment put at £1.0bn to £1.5bn, with plenty more to come, especially as Lotus accelerates into its Vision80 plan, which should lift production to more than 5000 cars per year by 2028.
A Geely spokesman said the company is firmly established in the UK and is sticking with its agreed business plans for all UK companies: “Geely Holding remains committed to its operations, ongoing business investments and market presence the UK, where its strategy is unchanged.”
Like other car firms Autocar contacted, Geely declined to discuss the geopolitical situation at government level. But Autocar understands from industry sources that there is unease at a high level that further deterioration in the relationship could spill over into the automotive sector.
Car making doesn’t have the same security implications as a China-supplied 5G network, but it’s vulnerable to trade disputes, because it’s a high-value, high-profile business. The Society of Motor Manufacturers and Traders (SMMT) recognises a “concern when there are global trade tensions” but says: “Trade and investment between both countries is helping to grow our respective economies.”
In June 2019, the SMMT signed a co-operation agreement with its Chinese counterpart, the CAAM, that could develop into a vital communication channel to dampen hawkish rhetoric. “We hope this agreement bolsters relationships, manages issues and opens up new opportunities in both markets,” said SMMT boss Mike Hawes. The SMMT initiative might go some way to levelling the Chinese dominance in some vital areas of technology, too.
China has become the sole global source of some rare metals for lithium ion battery anodes and cathodes and components such as insulated-gate bipolar transistor switches – vital parts for any battery electric vehicle (BEV).
Time has moved on since SAIC pursued MG Rover in 2004, but the unseemly end to Britain’s last volume car maker, with Nanjing and SAIC squabbling over the remains of MG, asset-stripping its factories and subsequent on-and-off commitment to UK engineering and production, also illustrates how Chinese automotive strategy can be less than coherent.
Today, MG has reduced its engineering at Longbridge to a bare minimum, sold off the remaining land for housing and concentrated on a slimmed sales operation in London. However, new MG models show how Chinese production can translate into good-value family motoring for UK drivers.
Although the transfer of UK technical know-how to China is often flagged as a concern, the UK also stands to benefit from Chinese BEV battery technology. At least five of the world’s biggest battery cell manufacturers are Chinese. The £2m Lotus Evija hypercar, for example, will benefit from Chinese BEV technology.
Another little-known aspect of the UK-Chinese motor industry is the growing ownership of and investment in UK automotive technology start-ups by Chinese firms. Richard Gane, automotive management consultant at Vendigital, has tracked the Chinese acquisition of several British tier one and tier two suppliers. Some are high-tech, like Protean Electric, a maker of in-wheel hub motors by NEVS, the Chinese company that bought Saab and is ultimately controlled by Evergrande, a Chinese property firm that also recently bought American BEV maker Faraday Future.
Midlands-based pressing companies Covpress and UYT have been bought by Yongtai Chemical Group. The UK government’s trade department can’t supply financial figures for Chinese automotive inward investment into the UK, but independent estimates seen by Autocar suggest a figure of around £500m per year and growing.
The trade department does list the number of Chinese investment transactions, which average about 100 per year, the bulk of which, Autocar understands, are of small monetary value in technology companies, many thought to be making BEV components.
“Chinese investment can be a very good thing for automotive technology companies,” said Gane, “but we have to be careful that we don’t hollow out this emerging, new supply chain, resulting in very few tier one suppliers remaining British-controlled.”
*The 12 UK bases backed by Chinese firms*
*1. Changan UK R&D Centre - Birmingham* Engine and transmission design, research and development. Employs 200 people
*2. LEVC - Ansty, Coventry* HQ, engineering and taxi and van manufacture. Production capacity: 20k/yr. Employs 550 people
*3. Geely Design - Coventry* Advanced and production car design. Employs 100 people
*4. MG Motor UK (SAIC) - Marylebone* HQ, sales, aftersales and advanced design. Employs 100 people
*5. SAIC Motor Technical Centre - Longbridge, Birmingham* Engineering. Employs 50 people
*6. Nio UK Advanced Engineering Centre - Beabroke Science Park, Oxford* Advanced concept engineering and CAE crash testing. Employs 45 people
*7. Lotus - Hethel* HQ, engineering, design and car manufacture. Production capacity: 5k/yr. Employs 1150 people
*8. Lotus - Wellingborough* Anodising alloy structures. Employs 50 people
*9. Lotus - Norwich* Chassis, fabrication and aftersales. Employs 130 people
*10. Lotus Engineering - Wellesbourne* Concept, powertrain and design/production engineering. Employs 130 people
*11 Volvo Car UK - Maidenhead* HQ, sales, marketing and aftersales. UK sales in 2019: 56,208. Employs 160 people
*12 Volvo Car UK - Daventry* Training and development centre. Employs 40 people
*Q&A: Hui Zhang, VP, Nio Europe*
Why did Nio select the UK for an engineering centre?
“There were two reasons. We have strong connection to England that links back to our sadly missed co-founder, Martin Leach. The other is the very long automotive tradition in the UK.”
And why Oxford?
“It was chosen specifically for the access to extremely skilled engineers. Additionally, there’s a lot of momentum in Oxford for EVs.”
Do current government tensions concern Nio?
“We’ve always kept out of politics. But we see the benefits that global trade brings, and a strong economic co-operation is in all our interests.”
How much investment has Nio committed to the UK?
“We’re seeing the fruits of our investments, which have been very significant over the years. And we have achieved a positive margin on our products for the first time this quarter.”
What about UK sales of Nio electric SUVs?
“We were targeting sales outside of China this year but, due to Covid-19, we have had to postpone. It will take another two years to achieve. A launch in select European countries hasn’t been fixed but is coming. An analysis of which markets has been under way for some time.”
*READ MORE*
*How China is fuelling Volkswagen's electric dream*
*Bringing premium EVs to China: Behind the scenes at Nio*
*Will China's dwindling car market bounce back?*