Sanjoy Sen: Lessons for the car industry – and government – from Nissan success and Honda failure.

3 Jul

Sanjoy Sen is a chemical engineer. He contested Alyn & Deeside in the 2019 general election.

It’s pretty hard to find a negative angle on Nissan’s recent commitment to its Sunderland plant. A £1 billion investment will see an all-new electric model built there supported by its partner’s new battery plant. In all, this looks set to create over 900 new jobs plus over 4,500 in the supply chain.

As I discussed in terms of the Vauxhall plant at Ellesmere Port, government support has always been key to major investments: it happens worldwide.

But what’s most encouraging about the Nissan story is that it suggests some important lessons have been learned from the past. Whilst certain previous mistakes sit squarely with industry, other failures have highlighted the need for an ongoing relationship with government.

For what can go wrong, look no further than another Japanese car giant, Honda, whose Swindon factory will sadly close its doors this month. Things could have been very different, of course. Honda was brought in as a partner to save British Leyland in the early eighties. And for a decade, both Rover and Honda flourished. But Rover was ditched by the state, moved on repeatedly (from British Aerospace to BMW to the ‘Phoenix Four’) and failed in 2005. Meanwhile, poor European sales forced Honda out of Swindon.

What didn’t cause Swindon’s demise?

One factor we can take off the table early is Covid-19. Honda’s decision came well before the decimating impact of lockdown on car sales. Key factors cited by Honda for closure were major changes in the global car market including electrification, a trend the company has been left behind in.

Those opposing Leave may contend it was Brexit that dented Honda’s confidence and its EU exports. But reality is more complicated: whilst Swindon has been operating at half-capacity for many years, the UK’s two, much larger Japanese car plants, Toyota (Derbyshire) and Nissan (Sunderland) were running at consistently high output until 2020’s extraordinary events.

A bright start 

Following unsuccessful government talks with American and French manufacturers, Honda was invited in as a final shot at reviving BL and eventually returning it to private ownership. Perhaps worth remembering next time you hear that Margaret Thatcher didn’t care about British manufacturing, never intervened and left everything in the hands of the market.

The 1981 Triumph Acclaim was little more than ‘Europeanised’ Civic, but even die-hard traditionalists admired its faultless quality. A series of new models followed and, by the early 1990s, Rover had a strong-selling range (British style backed up by Japanese reliability), and was finally profitable again. Hondas were also in demand; having won Formula One six years on the bounce, the Japanese looked set for the same image-sales trajectory as Audi and BMW.

What could possibly go wrong from here? 

At the first sign of recovery, the 80 per cent state holding in Rover was off-loaded to British Aerospace in 1988. But as losses mounted in the parent company, BAe dumped Rover on to BMW in a shock 1994 sale.

Often derided as asset-strippers, (interested only in Land-Rover know-how and the Mini badge), the Germans initially invested strongly – but not necessarily wisely. As the ‘English Patient’s’ losses threatened to drag down its Bavarian owner, the give-away to the ‘Phoenix Four’ spared BMW the fall-out of shutting Rover themselves.

What then went wrong for Honda is down to the bit governments can’t help with: making things people actually want. Rivals Toyota are cleaning up with their hybrids, whilst Nissan’s Qashqai is a strong export seller and the company is expanding rapidly in EVs.

But as a fiercely independent outfit, Honda made for the exit as BMW arrived, and were soon left high and dry. Whilst excelling in America (holding 10 per cent of a sizeable market), their independent Swindon products never cracked European tastes, thanks to decisions that made BL appear almost sage-like: unrealistic pricing, missing key models, surrendering the lead in hybrids/EVs.

Critically, halving Swindon’s capacity to just 150,000 units per year (less than half of Nissan Sunderland) following the 2008 financial crash stripped the site of large-scale efficiency.

How might things have been different? 

There are clearly no ‘silver bullet’ solutions for government. Had the UK’s numerous auto-manufacturers (Austin, Morris, MG, Rover, Triumph et al) remained proudly independent, they risked being crushed by larger, foreign competitors. Yet forcing them together saw them fail collectively. And shoring up loss-making domestic car giants is increasingly proving a headache for governments worldwide.

Instead of an early sale to BAe, further cultivation of the Honda relationship, with a staged reduction in government stake, might have benefitted all parties. And in an industry characterised by mega-mergers, it’s unrealistic to imagine that Rover could have remained wholly independent. But, equally, it’s not unthinkable that they might found themselves part of a global portfolio and retained UK production – again, with strategic support from government.

Today’s news from Nissan is highly encouraging, but let’s not believe that government interaction ends today. Things are looking good right now but markets and techonologies change quickly. We need to be ready to respond.

Sanjoy Sen: The Government and Stellantis. ‘Picking winners’ is rarely a popular concept among Tories but it’s often a reality.

8 Mar

Sanjoy Sen is a chemical engineer in North Sea oil. He contested Alyn & Deeside in the 2019 general election.

The Government has been in “productive” discussions with Vauxhall’s new owner, Stellantis, over the future of the Ellesmere Port Astra plant and its 1,000-strong workforce. 

Three options are on the table: plod on building petrol cars until the 2030 government ban, close the whole place down or re-invent it as a long-term electric vehicle hub. The last one is evidently the most attractive but Stellantis is clear that it comes subject to government support. But are the fate of the factory and the fate of the Vauxhall brand one and the same thing? 

What is Stellantis, anyway? 

Back in 2014, Italian auto-giant Fiat acquired America’s Chrysler. And in 2017, General Motors off-loaded its European division (Vauxhall-Opel) onto France’s PSA Group (Peugeot-Citroen). That whole lot, comprising some 14 mostly over-lapping, loss-making brands, came together as Stellantis in 2021. MBA students will be poring over the internal politics and corporate culture clashes for years to come.  

Worse still, Stellantis is wildly over-represented in Europe but is miles behind in Asia. And its mainstream brands are under pressure from all directions: prestige players (BMW, Mercedes-Benz) are rolling out compact competitors while low-cost manufacturers (Dacia, Skoda) are fast raising their game. Then there are the externalities facing all auto-makers, from anti-car city mayors to debt-laden Generation Z preferring Uber to ownership

Stellantis does have one ace up its sleeve, though. Governments worldwide fret over redundancies, both in terms of the economy and the ballot box fall-out. Little wonder CEO Carlos Tavares can do the rounds drumming up taxpayer support globally. 

Government to the rescue (as usual) 

Brexit critics have been quick to highlight the reassurances offered to Nissan and the support demanded by Stellantis. But state backing is hardly new in the car industry. Germany recently offered up a billion Euros to secure the new Tesla factory over its EU competitors (sorry, partners). France already holds a stake in Stellantis with Italy set to follow suit. Even the Americans aren’t averse to a bail-out, rescuing both Chrysler and GM after they filed for Chapter 11 bankruptcy in 2009. 

The UK, of course, has plenty of experience here. Successive governments backed everything from DeLorean to British Leyland before finally losing patience. Even Margaret Thatcher, not a noted market interventionist, incentivised Nissan to come to Sunderland, resulting in a huge success.  

Tavares describes the UK decision to bring forward the petrol car sale ban to 2030 as “brutal”. In reality, the shift to hybrids and “pure electric” is inevitable – but Stellantis brands have been slower to transition than their rivals. “Picking winners” is rarely a popular concept among Conservatives but it’s often a reality. Kwasi Kwarteng needs to be confident that the Stellantis electric plan for Ellesmere Port looks long-term credible before committing taxpayer money. 

What might become of the Vauxhall brand?  

While the future of the factory might be secured, the Vauxhall brand itself could be a different story. In these Thunbergian times, car manufacturers are frantically ditching a century of petrol-based brand awareness and creating all-new, futuristic identities.

The Stellantis portfolio needs urgent pruning with even Chrysler under threat. Although its market share has long been slipping, a ruthless axing of the Vauxhall name wouldn’t be go down well in the UK. But a well-planned transition into a modern electric identity isn’t just achievable – it’s downright essential for success.  

A decade ago, former owner GM had high hopes for their Volt hybrid; a typical suburbanite could re-charge on their driveway, enjoy an all-electric commute and forget any range anxiety thanks to the back-up petrol engine.

Instead, it became a textbook example of marketing failure. Badged as a dowdy Chevrolet, it proved too radical (and expensive) for traditional buyers – yet too old-fashioned (and conformist) for super-trendy early adapters. The Volt came over here as the Vauxhall Ampera and suffered a similar fate despite being crowned 2012 European Car of the Year. Forgive the pun but they just didn’t plug it properly. Sorry. 

Sanjoy Sen: Smart motorways need improvements. But there’s no getting away from the self-driving revolution.

8 Feb

Sanjoy Sen is a chemical engineer in North Sea oil. He contested Alyn & Deeside in the 2019 general election.

Back in 2017, I spoke of little else than my new set of wheels. First, the smug satisfaction of trading a gas-guzzler for a hybrid. Later, the anguished howls as Sadiq Khan cancelled its Congestion Charge exemption.   

But I never got round to explaining the main reason for swapping. Saving money, cutting emissions and even virtue-signalling all had their attractions. But what really got me motivated was good old-fashioned self-preservation. 

The aged tank was serving me well until it let me down twice in rapid succession. Getting stranded on the motorway on both occasions was no fun but at least I had a (hard) shoulder to cry on. I certainly wouldn’t have fancied the same experience in a “live” lane of a smart motorway, hoping everyone would spot me in time and swerve past. With the M1 getting progressively converted, I resolved to investigate scrappage schemes and find more reliable transport.  

By early 2020, there had been 38 fatalities on UK smart motorways. But it’s important to relate this figure to a baseline. Sadly, there are fatalities on all motorways so the first question is whether smarts are safer (or not) than conventionals. But scientific analysis is one thing. Public perception is also highly relevant. This matters when we reflect on how transportation is going. 

According to the stats in the Department for Transport Stocktake and Action Plan, smart motorways are slightly safer overall than conventional ones. That’s said to be because spreading traffic over more lanes and adjusting speed limits to conditions improves driver behaviour, thus reducing moving collisions.  

But what is going badly wrong is the rise in static collisions involving broken-down vehicles. The allegedly smart systems don’t always spot the obstacle (i.e. you) in a “live” lane. And even if they do, they rely on every single road user rapidly bearing down on the stationary object (again, you) and taking evasive action. Worst of all, there’s often no safe means of escape for vehicle occupants before rescue arrives.

Following a 2019 fatal accident in South Yorkshire, the coroner called for an enquiry into smart motorway safety. The local Police and Crime Commissioner has called for their ban as has Claire Mercer, wife of one of the victims. Tellingly, Mercer considers the jailing of the Polish lorry driver who hit her husband’s car as the wrong outcome. And following another South Yorkshire crash, the coroner indicated Highways England may face manslaughter charges

One of these days, when cars are all smart, we can safely have smart motorways. (More on that in a moment.) In the interim, the Government needs a clear plan to reduce accidents and restore trust. 

Right now, there are three types of UK smart motorway. Controlled Motorways (CM) retain the traditional permanent hard shoulder but have a variable speed limit. It’s the other two that raise most concerns: in All-Lane Running (ALR) motorways, the hard shoulder is permanently “live” while, more confusingly, in Dynamic Hard Shoulder Running (DHS) motorways it sometimes is and sometimes isn’t. It’s a (minor) step in the right direction that DHSs are being turned into ALRs.  

Few of us get to pick where to break down but in some cases (e.g. a puncture) it is possible to limp along to the next refuge area. The Stocktake calls for these every three-quarters of a mile but we might need more still in places. And they need to get a bit longer so you can accelerate off them safely to prevent the type of accident already seen. Plus better monitoring to detect stationary vehicles, both via technology and increased patrols.  

But the fundamental question is not whether we can make smart motorways safer (we can) or whether we can eliminate accidents altogether (we can’t): it’s do we actually need them? The short-term and the long-term answers could differ. 

The Stocktake notes motorway traffic has increased by 23 per cent since 2000 and contends smart motorways have helped absorb this. But, like most transport infrastructure, motorways are sized for rush-hour demand. With work patterns set to permanently alter post Covid, that peak potentially flattens. With, say, 20 per cent fewer office workers commuting (analogous to working from home one day per week), that translates into a significant reduction. So, with reduced road use a possibility, we could re-examine our traffic projections. On some motorways, we might discover we don’t need to drive in the hard shoulder, after all. 

Further down the line (but not much further), however, transportation is on the cusp of a revolution. Within a decade, vehicles are not only set to go electric, they’ll also become highly autonomous. Yes, some might write all that off as unrealistic, “woke” nonsense but even the quickest search on what real-world car companies are actually up to suggests otherwise. And when vehicles become smart (and can automatically respond to hazards), smart motorways finally make sense.  

Although UK motorways are among the safest in the world, the traditional hard shoulder has never been without its risks. Such facts are little consolation to those affected by smart motorway tragedies, however. If we’re going to retain public confidence, we need to see improvements. Let’s not lose sight of the big picture: post-Covid traffic patterns are set to change things but nothing like as much as the self-driving revolution will. 

Sanjoy Sen: How can the Government accelerate a cleaner, more efficient future for transport?

10 Sep

Sanjoy Sen is a chemical engineer in North Sea oil. He contested Alyn & Deeside in the 2019 general election.

“It’s a bit like saying we’re banning the sale of steam engines by 2040″. So responded Aston University’s David Bailey to the axing of “conventional” (i.e. petrol and diesel) new car sales. As green alternatives improve and prices fall, which they both are at last, today’s vehicles will become obsolete long before any government deadline.

On the face of it, the road to zero-emission transport ought to be straightforward. Anything too big to lug around massive batteries (lorries, buses) works fine as a hydrogen fuel-cell vehicle (FCV). Small stuff (private cars) are well-suited to becoming electric vehicles (EVs). And intermediates (taxis, delivery vans) could be either.

That, of course, overlooks myriad “where” issues: where to source the hydrogen and electricity, where to obtain battery metals, where to plug in. And that’s just one future scenario: the automotive industry is feeling highly uncertain with autonomous (self-driving) technology set to ultimately consign driving and car ownership to history. Furthermore, Covid-19 might fundamentally alter travel patterns, with greater flexibility replacing rush-hour madness.

Here in ConHome last month, Ruth Edwards MP proposed bringing forward the cut-off to 2030 whilst accelerating electric vehicle (EV) roll-out. Although I can’t violently disagree with that, EVs still aren’t an option for everyone yet. Meanwhile, others who could switch remain confused about technology and are wary of legislation changes. So, in the absence of a clear roadmap, how best might the Government help transportation to support the economy – and the environment?

Short-term: all about EVs?

Last year, I made some tentative EV queries. At one leading manufacturer, the UK’s annual allocation had long been snapped up on-line. At another, the dealer had plenty more customers than cars. Whilst I chose to hang back, EVs are fast becoming a practical, affordable proposition for many: it’s supply that can’t keep up until battery production ramps up and new models hit the market.

An increased purchase grant or scrappage scheme would offer manufacturers a much-needed short-term boost. But, as per Norway, could these become largely subsidies for the well-off? There’s only one thing I might contest in Edwards’ article: even Jeremy Clarkson isn’t berating EVs any more, it’s the dearth of plug-in facilities that infuriates him. To tackle the public’s fundamental concerns, government support might be better directed towards the charging network. (And, for that matter, energy storage.)

For many, however, EV prices and charging headaches remain a deterrent for now. But commuting on a small battery backed-up by a petrol engine whenever required might offer a near-seamless transition. So, rather than focussing solely on EVs, let’s see the Government recognise the value of plug-in hybrids and support these also.

But the biggest short-term improvement in urban air quality might be via an early switch towards zero-emission public transportation. Whilst the Government has provided urgent sector support during the current crisis, the Bus Service Operators Grant (BSOG) still favours diesels over FCVs and EVs: an obvious candidate for review.

What does the long-term future look like?

Environmental concerns and new technology put transportation into a state of flux long before Covid-19 did. And no-one seems more uncertain than the automotive industry itself. In Germany, Mercedes-Benz abandoned hydrogen cars just as deadly rival BMW announced its own FCV. Over in Japan, Toyota has long backed hybrids allowing Nissan to forge ahead in EVs, including Sunderland’s top-selling Leaf. Whilst in the States, GM’s Volt competitively-priced plug-in hybrid flopped (Vauxhall Ampera to us) – yet the public just can’t enough of upstart Tesla’s super-pricey EVs.

But there is growing acceptance that autonomous technology will prove a game-changer. Responding to the threat of sector entrants Google and Uber, Volkswagen’s vision of the future is a self-driving, shared-use ‘pod’, summoned up via an app. (So the next time you hear “I’m never buying an EV” or “you won’t catch me driving one of those plug-in things”, you’re probably listening to an enlightened futurist, not a frustrated Luddite.) This is a reality government needs to contend with in years to come, not decades.

Self-driving is often seen in a purely urban context but its opportunities could go much further. In rural areas, bus operators often ditch lightly-used routes uneconomic for a large, manned vehicle. Here, the Government might encourage early adoption of autonomous mini-buses operating in response to real-time demand: the Industrial Strategy Challenge Fund is a welcome first step in this field. As well as a lifeline for the elderly and the socially-isolated, as we work from home in remote locations or commute at different times, it’s economies with flexible transportation that will emerge the strongest post-Covid.

And what shouldn’t the Government do?

Gone are the days when you could freely drive any vehicle down any street at any time. But let’s not make the future any more complicated than it needs to be. In addition to addressing infrastructure bottlenecks and supporting new technology, the smartest thing the Government can do is not confuse or antagonise motorists.

ConHome regulars will recall my satisfaction at trading an ageing gas-guzzler for an eco-friendly hybrid – quickly followed by indignation at the withdrawal of its Congestion Charge exemption. Clobbering folks nudged into doing the right thing might prove highly counter-productive, creating uncertainty and provoking resentment. Similarly, the Scottish government’s Workplace Parking Levy (a hastily thought-out concession to the Greens) penalises those lacking a public transport alternative, whilst in itself doesn’t reduce emissions.

No-one can predict precisely how the future of transportation is going to pan out. But it’s critical for the Government to consult consumers, industry and experts alike before taking the big decisions. The consequences for getting it wrong are significant. Remember, diesels were once touted as the clean future. And why rolling out smart motorways before the advent of smart vehicles was never going to end well.