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Automotive firms benefit from China insights

21st Apr 2020 6 min read

This is the latest weekly update from Santander’s automotive team on how the coronavirus pandemic is affecting our clients and the sector as a whole.


The Society of Motor Manufacturers and Traders (SMMT) has continued its proactive response to the crisis, last week holding its third weekly coronavirus webinar. Run by the organisation’s CEO Mike Hawes, the session covered topics ranging from access to finance and government support schemes, to the specific issues facing ‘stranded’ mid-size businesses. To listen again, click here

Hawes also played a valuable role in Santander’s own automotive-sector webinar just before the Easter break. Hosted by John Carroll, Head of International and Transactional Banking at Santander UK, it also featured Greg Sutch, Chief Executive of consultant Intralink – an organisation which is active in China, Japan and South Korea.

Sutch’s insights into the experience of manufacturers in China, many of which are now coming back online following coronavirus shutdowns, may be particularly useful for UK firms which will hopefully find themselves in a similar position in the weeks ahead. Other topics covered in the session included:

  • The extent to which the pandemic is forcing firms to innovate in the digital sphere and develop new working practices – many of which have the potential to result in permanent changes.
  • The importance of the UK automotive sector’s adaptability and resilience in making sure it bounces back strongly from the crisis.
  • The extent to which globalisation and international trade will help shape the sector’s response to the pandemic and its aftermath.

Looking further ahead, Santander is organising a virtual round table on 3 June, to coincide with the SMMT Open Forum and Meet the Buyer event. This will focus on opportunities for automotive firms in markets such as Hungary, Czech Republic and Slovakia. Further details will be made available in due course.

Spotlight set to fall on OEMs

We expect to see an increasing focus in the weeks ahead on the issues facing the global supply chain for original equipment manufacturers (OEMs) across all sectors. Major OEMs are generally well positioned to survive the pandemic thanks to factors such as geographical diversification and solid levels of capitalisation. The same may not be the case for many of the smaller businesses that make up their supply bases.

Looking back to the financial crisis, it is estimated the total number of global suppliers fell by as much as 20% in the recession that followed. There are increasing concerns today that the distance many OEMs have put between themselves and their supply chains may work to their disadvantage when they come to ramp production back up as the coronavirus crisis begins to subside.

As such, OEMs may decide to use the current downturn as an opportunity to analyse their supply chains. This will enable them to prioritise the throughflow of the parts and raw materials most critical for revenue generation, rather than simply taking steps to support the suppliers where they spend the most money. As well as helping production get back up to speed more quickly, this approach also has the potential to resolve longer-term sustainability issues.

Manufacturers welcome government support

The measures put in place by the Chancellor of the Exchequer, Rishi Sunak, to support businesses affected by the coronavirus crisis have been largely welcomed by manufacturers’ organisation MakeUK. Ahead of the Easter break, Sunak revealed that £90bn of business interruption loans have now been approved, supporting almost 1,000 firms. A further £1.9bn has been provided in the form of corporate finance.

There has been more evidence of the vital role manufacturers of all types are playing in producing the medical equipment vitally needed all over the world to help health services deal with the pandemic. Jaguar Land Rover (JLR) has in recent days turned over its prototype build operations to production of protective visors for key workers.

The firm is making the only re-usable NHS-approved visor of its kind at JLR’s Advanced Product Creation Centre in Gaydon, Warwickshire. Weekly capacity is expected to be around 5,000 units a week.