A new report commissioned from KPMG by the Society of Motor Manufacturers and Traders (SMMT) has highlighted a £74 billion opportunity for the UK if the industry fully embraces digitalisation over the next two decades.
The UK automotive industry is calling on Government to support the sector’s future competitiveness by putting digital manufacturing at the heart of its industrial strategy. A new report commissioned from KPMG by the Society of Motor Manufacturers and Traders (SMMT) has highlighted a £74 billion opportunity for the UK if the industry fully embraces digitalisation over the next two decades.
‘The Digitalisation of the UK Automotive Industry’ report, launched today at SMMT’s annual dinner, examines the future of digital manufacturing – sometimes known as the fourth industrial revolution – and outlines the benefits for the industry, consumers and the wider economy, as well as highlighting the potential challenges the UK sector must overcome. Alongside the ongoing development of ultra low emission and connected and autonomous vehicles, the transition to digital manufacturing represents the biggest step change for automotive manufacturing since the introduction of automation in production lines in the 1960s.
New technologies such as intelligent robotics, 3D-printing and artificial intelligence, combined with new approaches to data management, will help manufacturers and the supply chain to save time, boost productivity, reduce waste and costs, and respond more effectively to consumer demand. These technologies will also reduce plant maintenance and machine downtime, enable faster product planning and more accurate forecasting of customer needs. Customers, meanwhile, will enjoy greater levels of personalisation, more product content and connectivity, more responsive service and even shorter waiting times for new models.
By embracing digitalisation, the automotive manufacturing sector as a whole stands to gain £6.9 billion every year by 2035, with a cumulative benefit to the wider economy of some £74 billion. This is a significant prize, but there are challenges to be overcome by industry and government, if it is to be realised. The UK’s digital infrastructure needs to be improved, the skills gap addressed and investment in digitalisation accelerated, while clear policies on cyber security and standards for data sharing must be developed to promote trust.
SMMT is calling for government to support this work and ensure the UK remains a major global manufacturing destination, by putting digitalisation at the heart of industrial policy. Other countries have taken the lead. Germany was the first to adopt a digitalisation strategy, Industrie 4.0, led by Chancellor Angela Merkel, while in the US, the Industrial Internet Consortium is funded with US$1 billion. These countries are already collaborating on standard setting and Japan will soon launch a similar Industrial Value Chain Initiative.
Mike Hawes, SMMT Chief Executive, said, “We may only be at the beginning of a new industrial era but with innovation and continuous improvement part of the automotive sector's DNA, we are well placed to embrace the opportunity. Significant capital investment will be necessary and we must put digitalisation at the heart of the UK's industrial strategy to ensure we are equipped with the right skills, infrastructure and standards. The competition from other countries is intense, so we should follow the model that is proving so successful in the development of low emission and connected and autonomous vehicles in the UK, with a collaborative approach between government and industry.”
A survey of SMMT members’ readiness for digitalisation shows automotive companies are most concerned about funding, knowledge and skills development. Respondents called for government to help promote and encourage digital manufacturing, with measures including funding and tax incentives to support innovation and investment in new machinery, technology and plant development; regulation to encourage adoption of machine to machine communication; and regional policies to encourage technology providers to locate close to manufacturing hubs.
John Leech, Head of Automotive at KPMG in the UK, said, “The UK automotive industry is already the most productive in Europe but faces increasing competition from lower cost countries and uncertainty following the UK’s vote to leave the EU. The application of digital technologies to the design and manufacture of vehicles will help to secure the industry’s competitiveness in the decades to come. The industry has started to apply digital technologies with the vision of creating a common digital thread from the customer, through the vehicle manufacturer and its supply chain. It is now time for the UK government and industry to accelerate its collaboration into digital manufacturing technology, following the examples set by Germany, Japan and the US.”
Hi-res infographic and full report available to download here
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About SMMT and the UK automotive industry
The Society of Motor Manufacturers and Traders (SMMT) is one of the largest and most influential trade associations in the UK. It supports the interests of the UK automotive industry at home and abroad, promoting a united position to government, stakeholders and the media. The automotive industry is a vital part of the UK economy accounting for more than £71.6 billion turnover and £18.9 billion value added. With some 169,000 people employed directly in manufacturing and 814,000 across the wider automotive industry, it for 12.0% of total UK export of goods and invests £2.5 billion each year in automotive R&D. More than 30 manufacturers build in excess of 70 models of vehicle in the UK supported by more than 2,000 component providers and some of the world's most skilled engineers.More detail on UK automotive available in SMMT's Motor Industry Facts 2016 publication at www.smmt.co.uk/facts16.
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff. The UK firm recorded a revenue of £1.96 billion in the year ended September 2015. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 174,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.