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Digitising automotive industry could generate billions for UK economy

By investing properly in digital technologies, the automotive industry could gain £74bn for the UK economy by 2035, according to a report

The UK economy could gain up to £74bn by 2035 if it embraces the digitisation of the automotive industry, according to a report published by KPMG.  

The report, The digitalisation of the UK automotive industry, was commissioned by the Society of Motor Manufacturers and Traders (SMMT) and highlights the benefits of new technologies such as robotics, artificial intelligence and 3D printing. 

“By fully embracing digitisation, the automotive sector stands to gain £6.9bn every year by 2035,” the report said. “The cumulative total benefit to the economy could be £74bn by 2035.  

“Our forecast is that if the UK automotive industry were to make a step change towards embracing digital technologies leading to fully digital vehicle manufacturing factories within the next 20 years, then by 2035 gross value added in the UK would be higher by £8.6bn (at today’s prices), which represents 0.3% of GDP.”

But the report said this would not come easy, and there were challenges to address for the automotive sector and government for the benefits to come to fruition.

“The UK’s digital infrastructure needs to be improved, clear policies on cyber security must be developed, the skills gap must be addressed and investment in digitisation must be accelerated,” the report said, adding that the sector deserved more attention from the government.

“We recommend that the government places digitisation at the heart of its new industrial strategy, focusing in particular on skills, digital infrastructure, cyber security, access to finance and technology demonstrators,” it said.

But it is not all up to the government. The report called on vehicle manufacturers and suppliers to develop digital strategies that must be led by the CEO, but also supported by “cross-functional teams underpinned by new digital skills such as digital scientists, digital architects, digital engineers and operational development capability”.

Mike Hawes, CEO of the SMMT, said the automotive sector was well placed to “embrace the opportunity” brought by the new industrial era.

“Significant capital investment will be necessary and we must put digitisation at the heart of the UK’s industrial strategy to ensure we are equipped with the right skills, infrastructure and standards,” he said.

“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.”

Flexible production

The report said the digitisation of manufacturing was already happening, driven forward by technologies such as connected devices and mobile. Technologies such as 3D printing and intelligent robotics “have enabled an entirely new flexible system of production to be imagined”, the report added.

Digitisation of the auto industry could improve productivity by up to 5% and reduce time to market by up to 25%. Machine downtime would also be reduced and it would make it easier to forecast customer needs. Countries including Germany and the US have already introduced policies to drive digital in the sector.

John Leech, head of automotive for KPMG in the UK, said digital technologies would help to secure the sector’s competitiveness for decades.

“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,” he said.

“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.”

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