Diverse British auto industry is on the rise
Foreign owners continue domestic output
The United Kingdom is the birthplace of some of the world's most prestigious car brands -- and some of the industry's greatest failures, such as Austin, DeLorean, Healey, Riley, MG Rover and Triumph.
After some difficult years and despite a looming recession, the United Kingdom's auto industry is on the rise. The brands leading the way -- Aston Martin, Bentley, Jaguar, Land Rover, Mini and Rolls-Royce -- no longer are in British hands, but they still produce nearly 100 percent of their vehicles in the United Kingdom.
Car buyers don't seem to mind that the brands' owners are based in Germany, Kuwait or India. Five of the six brands have achieved record sales since 2007.
Mini and Rolls-Royce reported record global sales in 2011. By 2015, Jaguar Land Rover wants to increase its yearly deliveries to 300,000 units, from 274,460 in 2011. Bentley aims to double its sales to 15,000 vehicles with its current model line.
"The British car industry is experiencing a real renaissance because of a focus on British automotive culture, design, sportiness and a premium-luxury positioning," said former Porsche sales boss Klaus Berning.
In London, one might believe British cars rule the high-end auto world. That is not the case. The United Kingdom's six main premium players accounted for combined sales of a little more than 574,000 vehicles last year. By comparison, Mercedes-Benz sold 1.2 million vehicles in 2011.
"But still, the British brands' revival is remarkable," said Berning, now a consultant.
A key reason for the rebound is that the premium brands have been willing to invest to improve plants and products. Jaguar Land Rover plans to spend about $550 million on a new United Kingdom engine plant. BMW Group plans to invest $780 million by 2014 to upgrade its United Kingdom facilities, bringing its total local investment to more than $2.3 billion since 2000.
Former Rolls-Royce CEO Tom Purves said the benefits are evident. "Things in the British car industry look very good, with very high levels of inward investment over recent years paying off in big numbers and great exports," Purves told Automotive News Europe. "The infrastructure is in excellent condition, with hardly an old building left. Japanese and German processes have brought rigor and constructive orientation to a work force once known as tough to manage. Management is ahead of the game with leadership skill previously lacking."
All of the British premium brands aim to boost sales in 2012, and Aston Martin and Bentley expect double-digit growth. While many automakers are experiencing lower sales, especially in Europe, Bentley CEO Wolfgang Duerheimer said his brand is experiencing the opposite. "Our dealers are reporting significantly more customers in their showrooms," he said.
The former Porsche r&d boss said Bentley customers had been reluctant to buy in the last three years because they did not want to appear showy when so many people were suffering during the global recession.
"Many entrepreneurs and successful businesspeople finally want to be a bit self-indulgent again," he said.
All of the premium brands are following a similar success strategy. They are expanding into new markets to reduce their dependency on the United Kingdom and western Europe. They also are enhancing their ability to meet individual customer needs by offering more limited-edition models, as well as more opportunities for buyers to personalize their purchases.
The most important change is that the six brands are expanding their product portfolios. Rolls-Royce's sales have surged since it added the Ghost. Mini's sales have risen steadily as it has gone from offering one model to a family of six variants. Aston Martin CEO Ulrich Bez has driven his automaker into the premium minicar segment with the introduction of the Cygnet, a high-end version of the Toyota iQ.
Some industry watchers have questioned whether Aston Martin would hurt its brand image by offering the Cygnet.
PricewaterhouseCoopers consultant Felix Kuhnert doesn't think so. "Just have a look at the three German premium brands. Some people doubted that an Audi A1, a Mercedes A class or a Mini could be a success. They were wrong," he said. "If a brand and product is strong enough, there is enough volume."
The next key segment for three of the six British premium brands is SUVs. Jaguar, Bentley and Aston Martin are preparing to join the niche. Aston Martin would do so by reviving the Lagonda subbrand. Said Berning: "An SUV is a must for any premium brand that wants to establish a dense and profitable worldwide dealer network and to benefit from global growth."
He said this is particularly true in markets such as Brazil, Russia, India and China. "The SUV segment is one of the most stable and prosperous despite all discussion about CO2 emissions and consumption," Berning said. He knows what an SUV can do for a brand because he was at Porsche when it launched the Cayenne SUV, which quickly became the German brand's top-selling model.
Berning says Jaguar and Aston Martin would benefit most from having SUVs. "Jaguar needs an annual sales volume that is at least double what it had last year to operate a sustainable global dealer network," Berning said. "Aston Martin offers wonderfully designed sport cars, but sport cars are not enough to survive."
Analysts see some other reasons why the British premium brands are doing well. Those include the country's racing heritage, which gives the United Kingdom a deep pool of talented designers and engineers, and the flexibility of the labor force compared with other European countries.
The United Kingdom's downsides include high labor costs, strict and costly environmental regulations, the volatility of the pound and a lack of Tier 1 and Tier 2 supplier factories. "A higher level of component import is necessary compared with some other major producing countries," said Rick Hanna, PricewaterhouseCoopers global automotive leader.
The six brands also face the risk that top-level bosses at headquarters might lose touch with what makes their British subsidiaries special.
"The mother group needs to understand how to manage the brand. VW and BMW seem to be exceptionally good at this," said Purves, who now works as a consultant to Lotus.
Another concern is whether brands such as Jaguar and Land Rover will need to open factories abroad.
Said Kuhnert of PricewaterhouseCoopers: "They have to be very careful with shifting production to other countries. The success of Porsche shows how important the production footprint is."