SMMT’s Role in Shaping UK Automotive Supply Chain

[Transcript]

[00:00:00] Jan Griffiths: This is the Auto Supply Chain Prophets Podcast, where you'll hear from experts of all facets of supply chain in the auto industry to help you prepare for the future. I'm Jan Griffiths, your co-host and producer.

[00:00:17] Terry Onica: I'm Terry Onica, your podcast co-host. Let's dive in.

[00:00:23] Jan Griffiths: Hello, and welcome to another episode of the Auto Supply Chain Prophets Podcast. Let's check in with my co-host, Terry Onica. Terry, what you been up to?

[00:00:32] Terry Onica: Well, today, I had an outage of my internet at my house. And so, quickly, Jan and I had to get together to figure out what was going on. And I am sitting in her brand-new podcast office that she's never used before. So, I got to use it before her, but we talked about risk management and contingency planning.

[00:00:51] Jan Griffiths: We did just happen to have the podcast studio right there. Now, we're not going to let Terry turn the camera around because if you do, you'll see all the boxes and the mess on the other side of it; it would not be pretty. But I have to say, I am thrilled with the sound quality and the way the podcast studio is set up. But you're right, Terry, we had to very quickly pivot and come up with a backup plan. Contingency planning was right there, right? Which is something that we all know and love in the supply chain business, particularly in the automotive industry.

[00:01:22] Terry Onica: And it looks great behind me. It looks really good. I love it. It looks really cool.

[00:01:26] Jan Griffiths: I can't wait to use it myself.

[00:01:29] Terry Onica: I might just keep it for the podcast.

[00:01:30] Jan Griffiths: Thank you. Thank you. So, today, we are going to take a trip across the pond. We are going to go to the UK and we're going to talk to somebody who is very much focused on the automotive industry in the UK. He has a very interesting military background. He is John McLellan-Grant from SMMT. John, welcome to the show.

[00:01:57] John McLellan-Grant: Thank you very much to you both. Good to be here.

[00:02:00] Jan Griffiths: John, tell us a little bit about SMMT because our audience is global, but I would say the large concentration of our audience is in the US. So, educate us, if you would, please, on SMMT.

[00:02:14] John McLellan-Grant: Yeah, happy to do so. So, SMMT, the Society of Motor Manufacturers and Traders, is probably the largest and most influential trade association in the UK for the automotive sector. We are, and have been, the voice of the industry since 1902. We have a membership of just under 900 members at the moment, and that ranges from all the automotive companies right the way, from OEMs down the supply chain to raw materials providers. And what we do there is help voice their views and concerns affecting the sector with local and UK government, and help with regulatory authorities, et cetera. We do a lot of events that mean we can get members together and hopefully share best practices, but obviously, help them promote their own businesses within the sector also.

[00:03:06] Jan Griffiths: You know, John, a lot of the British brands have gone away over time. Aston Martin is still there, still British-owned, I believe, and producing in the UK. Are there any other British-owned manufacturers?

[00:03:19] John McLellan-Grant: I suppose we've still got new entrants in the marketplace. So, for example, a company called RBW who are focusing very much on electric vehicles, and they're rebranding, if you like the old heritage shells from MG and Jaguar E-Type. So, very much British-owned. And there are a number of others I can mention. Heritage EV, which are based in Blackburn, up in my neck of the woods near Manchester. They do minis, but it's very much around how they convert conventional and combustion engine minis into EV minis. So. There are still a few privately owned in there. The larger ones, no; obviously, Bentley’s now owned by VAG. Lotus is owned elsewhere as well. So, not as many as they used to be.

[00:04:04] Jan Griffiths: Hmm. But there is still a thriving automotive industry in the UK and, therefore, a supply chain to support it, just not necessarily British-owned.

[00:04:14] John McLellan-Grant: Absolutely. Absolutely. And, you know, if you look at the country as a whole, yes, we still have a very healthy sector with manufacturers over here. Nissan and Toyota, on the consumer side, are still very active in terms of bus and coach, HTV, and off-highway vehicles as well.

[00:04:32] Terry Onica: Speaking of EVs and the EV market, can you tell us about what the current status is of the automotive industry in the UK? What are you focusing on right now in SMMT?

[00:04:41] John McLellan-Grant: So, currently, the policy team at SMMT is working with OEMs, manufacturing companies, and other trade associations within manufacturing around lobbying the government for an industrial strategy, which covers pretty much all the manufacturing bases, but obviously, we're focusing purely on the automotive sector. From the EV side, the challenges around that have been within the infrastructure for battery manufacturers. So, Tata Steel and Agratas are now firmly in place and working to build their Gigafactory in Somerset. AESC is up in the Northeast, right next to Nissan, and they've invested considerable amounts now in their factory, which is absolutely huge. They're now starting Phase Three, and they should be full-blown running, up and running even bigger than they are now, early next year. So, yeah, it's getting there slowly but surely.

[00:05:35] Terry Onica: What are some of the challenges in the supply base and the tiers?

[00:05:39] John McLellan-Grant: Within the tiers, I suppose it's an interesting one, actually, in terms of where the supply chain sits because they're all very different in what they supply within the supply chain.

So, some of their challenges are very different. Some of them are pretty similar, and they're all sort of looking at decarbonization. How can they make sure they, you know, make sure that the plant is the most efficient, the most carbon-friendly, and green? And also, workforce, you know, since Brexit, we have seen a dip in the workforce skills as well as labor. A lot of promotion gone into apprenticeship schemes, bringing people back into the workforce, and reskilling some of the people that had left the automotive sector at some point. So, they're the main challenges that we're seeing so far, really.

[00:06:27] Terry Onica: Speaking of decarbonization, sustainability is such a hot topic right now, globally. Can you share what's going on there with SMMT with regard to sustainability?

[00:06:39] John McLellan-Grant: So, we're supporting using, we have a varied number of working groups that we do throughout the sector. So, what our members do are associated to a particular working group, and then we have some umbrella working groups around that. So, we've set up an energy task force, which is, as it sounds, focusing purely on energy consumption with the increasing energy prices. So, we're looking at that and talking to the government on how best we can look at that because certain production and manufacturing practices at the moment aren't covered by things like the climate change agreement.

So, battery manufacturer, for example, isn't covered under the current climate change agreement with the government. So that means that they can get a discounted rate on energy. However, it's very energy intensive. So, we're currently working with companies like Agratas and AESC to talk to government and how they can best support that continued production. Other than that, I think, you know, focusing on sustainable supply chains is what every part of the supply chain is doing at the moment. You know, that's becoming a critical priority, not just about how they're maintaining their green standards, but how the people that they're purchasing from are looking at their supply chain and going, are you giving us sustainable product? Is it politically correct? Is it the health and well-being of workers? Things like that. That's certainly becoming a lot of stronger emphasis along the way.

[00:08:04] Terry Onica: You know, I've worked with SMMT for many, many years through the industry standards, in particular for me, MMOG/LE. You've been a big supporter of that throughout the years, not only in having people be a part of the team, but also in the training of it. What are some other initiatives that you have going on in SMMT that you might want to share with everybody when it comes to supply chain?

[00:08:26] John McLellan-Grant: So, in terms of initiatives, we don't really have initiatives as such because we're driven by the members really. If anybody comes to us with any particular issue, we've normally got one of our policy team that can either help with that liaising with government or some of the regulatory authorities. We have a technical team that can support that. So, they're very varied. A lot of companies come to us for legislation change, for example. So, if you want a legislation change, we'll talk to the Department of Transport that can take a considerable amount of time or average around about two years to get that change. So, various things are ongoing at the moment, depending on what we've been asked for, to be fair.

[00:09:07] Jan Griffiths: John, how do you align with other organizations? Selfishly, I'm thinking of the Welsh Automotive Forum.

[00:09:13] John McLellan-Grant: They're very much part of our DNA, really. We've got a number of associations within the UK that are, you know, either what we call regional clusters. So, we have the North, the North Automotive Alliance in the Northwest. In the Northeast, we have the Northeast Automotive Alliance, both of which I deal with on a regular basis. Their CEOs and I talk, and we work together with them and support them; they affiliate into us. With the Welsh Automotive Forum, very, very similar as they're the National Body for Wales. So, we are constantly on the phone to Rob whenever he needs us; he knows we're there to support him as well. But, also, we were sort of the link between some of the other, CBI and Make UK; for example, we'd work very close with them. The Federation of Small Businesses works with them. And then, you know, we're sort of in the middle in terms of government. So, straight into things like the auto council, which we help set up for government, where we're heavily involved in that on various counts. We also link into the European Automotive Association. So, CLEPA, VDA, people like that, very much sister organizations, and we often share, you know, what we can and where we can with them.

[00:10:24] Jan Griffiths: Sounds very collaborative. Sounds like it's very collaborative. It's great to hear that. These different organizations working together for the common interest, for the common good of the automotive community. I really love to hear that.

[00:10:39] Terry Onica: And I think in the US, you're almost like a combination of our MEMA, which is a supplier organization, and also like AIAG, too. You're involved with the standards. I know in IATF and I know in MMOG/LE, you help to drive the training in the industry. Isn't that correct?

[00:10:58] John McLellan-Grant: So, SMMT as a group is three companies, it's SMMT, which I'm employed by, it's the Industry Forum, which is the training organization, which is the trainer for IATF, and then you've got the Motor Ombudsman, which is basically the go-to watchdog for the consumer if there's an issue within the servicing and supply chain of the vehicle networks and things like that. So, it's three arms, but I'm focused purely on the supply chain side. But, yeah, Industry Forum is the training arm. They do all the training for the IATF, literally here, and have been known to go global. They're doing some work overseas at the moment, I know that.

[00:11:38] Terry Onica: Well, all the years I've been working with SMMT, I never realized that there were three organizations. I've worked a lot with industry forums that, as you mentioned, I thought they were a separate organization, but I didn't realize you were all together. So, that's interesting, I learned something today, too.

[00:11:53] Jan Griffiths: John, Terry and I are very much focused on technology and transformation. Some companies truly embrace technology. They're not afraid of it. They're not afraid to understand how they can leverage it to transform their companies because, let's face it, the automotive industry is going through a period of massive transformation. The road from ICE to BEV is not a straight line. EV adoption, you know, certainly in the US, scaled back considerably in the last few months. I know from my time in the UK earlier this year that EV adoption was not great, particularly in Wales, because in some areas of Wales, it's hard to find a gas station, translation, or petrol station, let alone an EV charging station. The technology is coming, it's happening, whether you want it or like it, it's coming. So, give us the UK, the British perspective on that. How are your members embracing technology with a view to transformation?

[00:12:55] John McLellan-Grant: In terms of that transition from ICE to EV, it has been a very steady growth curve. So, we do our registrations in March and September. So, we've just had the figures through because we produce vast amounts of data for the industry. The UK car market did go up in September by 1%; doesn't sound a lot, but it did. What we're seeing now is manufacturers and dealers increasing their discounts on EV to so that they make the ZEV mandate. Because they were, you know, bound by that ZEV mandate to hit 24%, we're around about 22% EV at the moment. So, we're not too far away. A lot has been driven by fleet, so fleet purchases because, currently, there is still a 0% tax and benefit in kind on EVs. The private consumer has fallen slightly, and the plug-in EVs are still doing fairly, fairly well, and fairly steady. Certainly, petrol and diesel registrations have dropped; petrol by around 9.3% in September, diesel 7.1% if I'm not mistaken. So, we're certainly seeing that change on that transition as the consumers have got more choices. You know, we certainly got more models coming out in 2025. You look at the Audi, BMW, new facelift models of them; Nissan are looking now at EVs for Qashqai, and obviously, the Leaf, which has been the traditional one for a number of years now. And then, new models that are coming out as well; Duke will be at EV as well.

[00:14:30] Terry Onica: Based on everything that you've been talking about this morning, all the changes going on in the industry, what is SMMT's strategy now and into the future? What are you going to focus on to really help this transformation that we're going through?

[00:14:45] John McLellan-Grant: Yeah, I suppose our focus is really around that support that we can give to the network of members and supply chain around the challenges that they're all facing, which is the, you know, the electrification, the battery supply chain, the diversification of supply chain as well because we're certainly seeing a lot of that post-Brexit. You know, how we can look at working together with trade deals with Europe, for example, that's still very much on the agenda for us and talking to government and making sure that they're making certainly the right moves into Europe so that we've got the right environment that we had previously, which was virtually a zero tariff. Currently, we're still trying to thrash out the ins and outs of that.

[00:15:27] Terry Onica: SMMT tracks a lot of statistics, as you just mentioned, and that made me think of what are some of the statistics or your favorites that you'd like to share with the audience that you have that maybe people aren't aware of, or just ones that you like to track?

[00:15:41] John McLellan-Grant: I suppose some of the interesting ones that I have been involved with are the tracking and help with the clean air zones in our cities. So, currently, most of our main cities have got government backing to put in place clean air zones around the ring roads. So, one of the exercises that we have done with certainly in my region is looked at how many vehicles that potentially could affect, i.e., how many vehicles are pre-2008, which you would class as, you know, in inverted commas, dirty diesel or non-Euro Five, Euro Six standard vehicles. So, that's been a really interesting project really, where we've enlightened the local governments on what the potential market would be for that transition and, obviously, what those vehicles look like. To give you an example, so my hometown and where I'm based is Manchester; they're looking currently at their clean air zone. It's still under review, but we noticed that 52% of the light commercial vans were all registered pre-2008. So, what that is reflecting is really where trades people and owner-managed businesses, sole traders are working, whether that's plumbers, electricians, joiners. So, the impact of a £12.50 congestion clean air zone charge going into the city center, what effect would that have on them, and how they would cope with that? So, that's been quite an interesting exercise.

[00:17:13] Terry Onica: Oh, that's fascinating, especially in your hometown; that's really cool to be able to see that. I know you track so many statistics in the industry. So, I just thought, what were some of the cool ones that you've seen? Thank you for sharing that.

[00:17:26] Jan Griffiths: John, as you look to your membership and our audience for this podcast, leaders in the automotive supply chain, based on all of your experience and what you're seeing happening in the UK and Europe and around the world, what advice would you give to supply chain leaders in the auto industry as they look toward the future and prepare for the future? Maybe just something small, John, something that they could start doing right away or open their mind to something new. What would that be?

[00:17:56] John McLellan-Grant: I think you touched on it briefly earlier. It's one word, I'd say, and that's collaboration. I think the more that companies are prepared to collaborate with the supply chain and talk to the supply chain, it just makes it 10 times easier for anything, whether that be labor issues, whether it be technical issues, whether it's carbon issues, whatever it may be. I think the more transparent and open those conversations are it can only make the job easier for everybody. It's probably the easiest one. We're certainly seeing a lot of that happening, and I think that's probably the easy and one-word answer, really.

[00:18:33] Jan Griffiths: But I think that that is a very powerful answer, John, because there's not a lot of collaboration. Certainly, my experience in the supply chain in the US, we talk a good game, we're all about, oh yeah, they're our partners. Oh, we collaborate. And then, when you get down to it, the actual actions that buyers take every day are far from collaborative. So, it's great that you're not only saying that you're walking the talk with your organization by collaborating with similar organizations. And now, we really need to take that mindset, that way of doing business, and translate it into the entire supply chain globally.

[00:19:14] John McLellan-Grant: Yeah, that would be fantastic.

[00:19:16] Terry Onica: You know, one thing I was thinking as you're both were talking, and this is for either one of you, what are organizations that are good collaborators? Who are the role models out there? Do either of you have one that comes to mind that you say this company has got it, or they're on their way to getting it?

[00:19:32] Jan Griffiths: I can answer it based on CEOs I've interviewed on the Automotive Leaders Podcast, and I would tell you one that stands out in my mind. Actually, there are two: the first one is Jon Husby from ADAC in Grand Rapids, and the other one is Hadi Awada from Axalta Mobility Coatings. Those two leaders are setting the tone for authentic leadership and collaboration internally and externally.

[00:20:00] Terry Onica: And how are they doing that, Jan?

[00:20:02] Jan Griffiths: It starts at the top, Terry. It starts walking the talk. It starts by the leader saying, "This is our culture." Defining our culture. This is how we will do business. This is how we will treat each other and we will treat our suppliers and our stakeholders. And getting away from command and control and being all about the numbers. Jon Husby said in the podcast interview, he said, "'Where's our KPI on culture?"

[00:20:28] Terry Onica: That's really good. Yeah. Where is it? Right.

[00:20:31] Jan Griffiths: Where is it? That's what we need to focus on. What about you, John? What have you seen? Who have you seen?

[00:20:36] John McLellan-Grant: I think if you looked at the, if you look inwards to the UK and the manufacturers that are here, I think Nissan would be the obvious sort of answer to that. You know, the way that they've set up in Sunderland with the supplier park around them is absolutely perfect. They're very close to all the suppliers. They're very open and honest with them as much as they can be where it comes to it. And they're always talking to them. So, I think that's where you see a very good sort of collaborative approach with that, without a doubt. And I think, you know, the likes of Bentley are looking to do the same, and now they're part of the VAG Group. They're all quite good at talking to their suppliers.

[00:21:15] Jan Griffiths: Great. Okay. Well, that's it. Thank you, John, for joining us today.

[00:21:21] John McLellan-Grant: Pleasure. Thank you. Thank you for having me.

[00:21:26] Jan Griffiths: Are you ready to find the money in your supply chain? Visit www.autosupplychainprophets.com to learn how, or click the link in the show notes below.