Challenges facing the auto industry mean managements will have to make the biggest strategic decisions in their histories, while ensuring they form key relationships to equip their boardrooms with the right skills and knowledge. The UK industry may also have only 10 years to change or face being wiped out, according to experts speaking on a Board Agenda podcast.

In partnership with Mazars, the podcast explores the startling challenges confronting auto industry boardrooms.

Andy Palmer, chief executive of electric van and bus company Switch, known as the “Godfather of EVs” for his work at Nissan, said the UK auto industry had a decade to adapt or disappear.

“If we don’t change, with all these forces… the dark scenario is that there is no auto industry in the UK and it migrates elsewhere in the world, whether that be Europe, Japan, or the US.”

Palmer made his remarks as the podcast panel discussed the headwinds faced by a troubled UK auto sector. Supply chain issues have hit the industry, while Britain is still working through the implications of Brexit and settling its terms of trade with the rest of the world.

Stretch targets

At the same time, the industry must cope with the transition to electric and hybrid cars. The UK has a target of ending the sale of petrol and diesel vehicles by 2030, with all new cars and vans being fully zero emission by the end of 2035.

Geopolitical uncertainty caused by the invasion of Ukraine has added an extra layer of complexity.

According to Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders: “All executives in the UK, and indeed globally, have got their work cut out trying to navigate the next few months, never mind years.”

There are structural issues for the UK industry to grapple with that will require vast investment, and these include the production of batteries. Most production currently takes place in China, Taiwan, Korea or Japan. The EU has seen the issue and will require batteries installed across members states to be 70% local by 2026.

However, the UK will need to consider its own strategic decisions. Palmer worries that there has been little movement to develop battery production in Britain.

The issues are not only technical. The scale of the issues likely means big brand manufacturers and suppliers need to form new alliances if they are to have any hope of addressing the challenge. And given auto industry lead-in times, those alliances need to be made soon.

“The challenge for boards,” says Louis Burns, a motor industry expert and partner at Mazars, “is that there are huge strategic decisions they need to make to secure the future of their businesses.”

A futures market

And that will need expertise “whether that’s done by bring in expert independent directors; whether it’s through consultancy; whether it’s reading the available material out there. It’s important to have a broad view of what you think is coming and to have a collective view of how you will respond.”

New strategic partnerships are already forming, notes Burns. “Strategic partnership and enhancing your skills set and your depth of understanding of these subjects are really key for boards because there are so many things they need to consider now.”

Boards will also need “foresight”, adds Mike Hawes. “Lift your eyes up to the horizon,” he advises auto industry boards. “You can see the direction the industry is going in; the fact you’ve got 140 plug vehicles on the market today—these were decisions that were taken 10 years ago.

“If you’re going to think about where you’re going to be in the next 10 years, you’ve got to look at what the market is going to look like, what the customer is going to look like, and how that aligns with your strategic plan…”.

Andy Palmer advises taking a deep dive on strategy days, “not just ticking boxes”.

“At Nissan, we established something call ‘market intelligence’—it had an insight into how human behaviour was changing around the world over the next 15 years. It helped define the need for different energy vehicles: ultimately, electric vehicles.”

Listen to the full podcast here.