Brexit rebalancing for Japan’s automotive companies

Nissan Ambassador Max Whitlock receives his gold all-electric Nissan LEAF to celebrate his double gold medal success at the Rio 2016 Games.

Record UK car production for 2016 was reflected in the 2% increase in employment by the largest Japanese automotive companies in the UK on the previous year. The fall investment in the UK automotive sector from £2.5bn to £1.66bn tells the other side of the story, which is that employment growth for Europe and Africa overall for those companies was greater than in the UK – at 7% – the main contributor being Yazaki opening plants in Morocco and Bulgaria.

As Mike Hawes of the Society of Motor Manufacturers and Traders puts it “Any imposition of tariffs is “an absolute red line for the industry” that would throw the future of some plants into doubt. “It would be very hard to overcome that level of additional cost, given plants operate on pretty wafer-thin margins.” Factories would not close overnight, he added, “but the potential is for death by a thousand cuts” as the manufacture of new models was moved abroad. “If you produce three or four models and you lose one, then inherently your competitiveness is affected.”

The Japanese automotive sector account for 7 of our Top 30 Japanese employers in the UK (if you count Pilkington, which manufactures a mix  of automotive and construction glass).  Globally these seven companies (Honda, Toyota, Nissan, Calsonic Kansei, NSG Pilkington, Denso, Yazaki) employ over a million people, around 10% of which are in the Europe and Africa region and around 2% (23,000) in the UK.

According to our analysis of last year, a rebalancing may well already be under way.  It looks like Nissan and its suppliers (Calsonic Kansei and Yazaki) had a good year in 2016 in terms of employment and production levels –  but Calsonic Kansei has made investments in plants in Spain and Russia over the past couple of years, where Nissan has other factories. Toyota and its supplier Denso reduced their employment levels in the UK in 2016 – in line with the decrease in production at Toyota.  The big growth story in Europe & Africa in terms of employment and investment was Yazaki, who added 150 employees to its design and sales operations in the UK, but this was dwarfed by the additional 10,000 employees in the region generated by opening plants in Morocco and Bulgaria.

Honda, Calsonic Kansei and NSG have their regional headquarters in the UK.  Honda‘s UK employment and production levels grew  (whereas employment shrank in the region overall) and they have publicly declared that their UK factory will be a global supply hub (80% of its production is exported to the EU). However, relative to the to the other 6 companies they have a smaller presence in the Europe & Africa region – the only other production facility being a factory in Turkey – which at least has the advantage of being in a customs union with the EU.

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