Presentation on theme: "Automotive sector innovation: Low carbon solutions for growth Philip Amison West Midlands Economic Forum, 21 st June 2013."— Presentation transcript:
Automotive sector innovation: Low carbon solutions for growth Philip Amison West Midlands Economic Forum, 21 st June 2013
Outline The automotive sector is changing Providing a stimulus to innovation and growth The Midlands is benefiting because of its historic and continuing strength in automotive and advanced engineering technologies This analysis is based on ongoing research covering the ‘low carbon vehicles’ sector in the Midlands
The automotive sector is changing Change is being driven by: Rising CO2 emissions Resource depletion Growing congestion and pollution Policy (national and international) Creating an increasing challenge to the existing automotive industry paradigm …
Ford’s “Blueprint for mobility” The number of cars on the world’s roads is forecast to grow from 1 billion now to up to 4 billion by mid-century “No one company or industry will be able to solve the mobility issue alone and the speed at which solutions take hold will be determined largely by customer acceptance of new technologies” “We’ll increasingly take advantage of the car as a rolling collection of sensors to reduce congestion and help prevent accidents” Ford Motor Company Executive Chairman Bill Ford’s keynote address at the 2012 Mobile World Congress in Barcelona
A stimulus to innovation and growth The range of technologies that are - and will be - important to success in the industry has expanded, including: Electronics Digital/Communications Materials and structures Fuel and powertrain The role of specialist suppliers of knowledge, R&D and components has become crucial for innovations of a more systemic nature (Köhler et al, 2012).
Open innovation In some industries, the process of innovation has become increasingly ‘open’, shifting from taking place within a single firm, across firm boundaries – involving other firms, universities, research institutes and end users (Chesbrough, 2003) Particularly relevant for industries or technologies where knowledge is widely distributed and firms cannot establish or maintain sufficient in-house capabilities Can raise profits, increase speed to market, enable firms to expand their markets and is seen as desirable at times of rapid technological change (Chesbrough and Crowther, 2006) Marks a change in innovation processes within the automotive industry which were traditionally shaped by the large vehicle makers and largely undertaken in-house
Phoenix industries Characterised as clusters of small and medium-sized businesses, working with broadly similar technologies, that have sprung up in former industrial areas (Christopherson, 2010) They benefit from the historic, relatively immobile, investments in industry knowledge and workforce skills that have taken place over a long period of time in these areas Benefiting from 'initial advantage' - “... personal networks, technical skills and market knowledge that have developed over a long time, giving them an edge over less 'rooted' clusters in the same industry.”
The West Midlands car industry A brief history: Previously prosperous region (2nd to South East in 1960s) Major deindustrialisation since the 1970s Lost all volume car production, now reliant on production of luxury vehicles and specialist niche firms The industry today: Vehicles manufacturers (premium/upper premium segments) Cluster of Tier 1 and Tier 2 suppliers Niche vehicle manufacturers Concentration of design, R&D and engineering consultancies University research expertise
The research – Interviews with firms 80 possible candidate Midlands firms initially identified 32 firms contacted so far 13 interviews completed Interview duration ranged from 25 minutes to 2 hours – most interviews lasted around 45 minutes Also interviewing policymakers/other stakeholders (2 interviews completed so far)
Structured interview format 1. Nature of the firm’s business - Main products/services, turnover, main customers and suppliers 2. The firm’s ownership and origins - Ownership status and origins, reasons for choice of location 3. Nature of the firm’s workforce – Workforce size, occupational groups, industrial/technical background, commuting distances 4. The firm’s external linkages - Relationships with other firms, with universities and/or with R&D centres, membership of industry networks 5. The firm’s approach to learning, knowledge transfer and innovation - How the firm keeps up to date with the latest developments in technology/the industry, approach to innovation (internal, ‘inbound’ or ‘outbound’ R&D/innovation) 6. External influences on the firm and the role for public policy - Main external influences on the firm, development needs and the role for public policy.
1. Nature of the firm’s business (i) Products/Services: LCV designers, developers and low volume manufacturers LCV servicing, repair (and retailing) Mechanical and electrical engineering consultancies/low volume manufacturers EV powertrain design, development and manufacture Designers, developers and manufacturers of lightweight structural components Designers and developers of advanced engineering components Designers and developers of fuelling infrastructure products (A number were Tier 1 suppliers to major automotive OEMs)
Location of the 13 firms Birmingham 2 Shropshire 1 Coventry 6 Staffordshire 1 Leicestershire 2 Worcestershire 1
1. Nature of the firm’s business (ii) The most frequently named automotive customers included: JLR, Mercedes Benz, Aston Martin, Bentley, Toyota, ‘major German and Japanese auto firms’, TRW, F1 teams; Vehicle fleet owners; Also - production for vehicle trials The most-named non-auto customers were in aerospace and defence Suppliers dependent on the product/project concerned, but typically: Preferred local suppliers where possible Only used overseas suppliers where necessary (e.g. specialist component or ‘directed source’) Turnover ranges from 0 to £44 million (see chart) – growth expected by many
2. Ownership and origins (i) Typically private limited companies, with ownership still in the hands of those who founded the company (only two exceptions in terms of ownership) Start dates vary from 19 th Century to 2009 – excluding the outliers, most started in the period 1999 – 2009 Most frequent origins include: Owner/MD with a Rover background/link - 3 Owner/MD with a motorsport background – 3 Owner/MD with an other automotive background – 3 Other – 4 (includes the two older firms)
2. Ownership and origins (ii) Reasons for choice of/staying at current location: Proximity to most important customers Local specialist skills base in suppliers/workforce Retain existing workforce Ease of commuting for owner/MD Want to be based in the UK/locally for brand reasons Central location (good for logistics) University linkage
3. Nature of the firm’s workforce Workforce size ranges from 2 to 560 (see chart) Tend to employ (plus use contractors): Science and engineering professionals Associate professional and technical Skilled trades Process, plant and machine operatives Mostly male workforces Most live close to the firm Several of the older firms had traditions of long service (15 – 40 years service not uncommon)
4. The firm’s external linkages Most firms involved in collaborations of one form or another: Collaborative R&D projects Informal collaborations with suppliers Formal collaborations with suppliers Most were members of/involved with networks: Niche Vehicle Network Automotive Council SMMT (few) University linkages were typically project or specific-topic related (division between those using local universities and those picking universities by specialism, UK-wide)
5. Learning, knowledge transfer and innovation Keeping up to date with technology/industry developments: “We are at the leading edge” Links with suppliers Use of internet Conference/seminar/trade show attendance Innovation: Largely undertaking internal R&D or in collaborative projects Some patenting/licencing of technology but not considered worthwhile by most firms “Whole company is set up to do R&D”; “Need to be constantly innovating to attract the attention of customers”; “Whole business is driven by technology”
6. External influences and the role for public policy Most used types of ‘support’: Grant funded R&D projects - NVN, TSB, EU Generic business support - Business Link/MAS/UKTI R&D tax credits 5 firms mentioned some contact with their LEP/Local Authority What more could be done?: More R&D grant funding – but need for greater continuity/progression (support beyond prototype stage, for commercialisation) ‘No finance available in the UK for manufacturing’ Lower taxes/tax breaks/Less red tape Role for MTC/Proving factories Public sector procurement role Need for a more strategic approach to transport/LCV policy
Emerging themes (i) Role of innovation in driving the sector: Smaller firms can innovate more quickly/more cheaply than the major auto firms Interaction across technologies; up and down the supply chain; and between large and small firms (enormous breadth of technologies) Hybrid firms providing services, plus prototyping/low volume manufacturing (largely in niche vehicles) Role of historic (and relatively immobile) investments: Past/ongoing importance of Rover/JLR Depth of skills and experience in suppliers and in the local workforce
Emerging themes (ii) Role of public-private sector cooperation: Establishment of the Automotive Council UK and its work in: Developing a technology roadmap Informing regulation Supporting development of the UK supply chain Earlier role of Advantage West Midlands, for example working with JLR to secure investment at i54, plus wider support for the automotive cluster Possible future trends: If mobility, rather than the car, becomes the focus – could it open up major opportunities for (disruptive) cross-sector investment (i.e. investment from outside the automotive sector as traditionally defined)?