Auto engineers sector focus – Bavarian boost

Auto engineers sector focus – Bavarian boost


hello and welcome to this edition of the ICT sector focus this week we’ve been digging further into the potential fallout from the forthcoming brexit and while the British government try to have their cake and eat it it seems the Germans or more specifically the Bavarians have something to say about it particularly when it comes to the automotive sector instead of taking the retailer’s perspective however deputy company’s editor mark robinson has looked at auto part manufacturers and what consequences investors need to look out for so mark let’s start with a news story that you identified from last month which you think has sort of potential fallout in relative actually this is more like a polemic this week as well Harriet to be quite honest here the warning question is Ilse ina and I’m my German isn’t all it should be especially I think that’s right and she’s Bavaria’s Minister of Economic Affairs and she sort of broke ranks with the Legion of European politicians and come out and specifically said that brexit or the aftermath could have serious negative implications for the German economy in general and manufacturing in particular and why that’s a significant of course is that she’s a senior member within the Christian Union in Bavaria which which is a smaller partner in angular Merkel’s grand coalition in Berlin and as Merkel’s running for a fourth term next year was expected to run for or fourth term she’ll need the support of the CSU and of course underpinning the CSU are all those sort of german or bavarian auto workers in place like BMW and Audi so you have to ask them to what extent it’s just sort of political posturing as opposed to any sort of meaningful sort of concerns I suppose for this well there and for the sector here well no I think I think no I think it is I think it is meaningful where the biggest end market for German automobiles by some measure we’re also interlink with the supply chain two and Germany genuine Bavaria in particular has a large trading surplus with the United Kingdom so it’s in their vested interest to do to see that we get some kind of equitable trading deal and the manufacturing front I mean let’s face it at the moment Germany is bankrolling the single currency project and so the man on the street over there might might and take too kindly to having the rug pulled out from underneath him in terms of in terms of you know economic growth which is what could happen if as many believe russ’s decided to play hardball making it make an example of the united kingdom but of course it remains to be seen and I think as we get closer or when that once article 50 of the lisbon treaty is triggered by the united kingdom we’re likely to see more economic pressure being brought to bear by by people in bavaria and other parts that run a large trade surplus the United Kingdom okay and you’ve highlighted a couple of companies in the article which you think this has implications for but bricks it aside how are things looking for the segment as a whole well yeah I mean I’ve concentrated on the supply chain really here and it links into the obviously with the wider growth the United Kingdom’s or automotive section now from 2009 automobile production this country is increased by fifty percent which is incredible really when you think about owners after the end of term where there’s 1.4 million vehicles produced in our kingdom maybe push about 1.6 by the end of the year that compares to 6.2 million in Germany which streams of something that disparity but when you consider the high point for manufacturing ended kingdom was in 1979 when we produced just over 1.9 million vehicles at that point and we’re heading back to that that stage now but more importantly it’s um it’s more sustainable I hate using that word essentially meaningless but I’ll throw it in there anyway because we’ve tapped into the medium to premium the premium end of the market so we’re not quite so dependent on the general economic cycle and plus it’s up the value chain as well so the vehicles are more profitable and there are higher Barry barriers to entry there’s a technological angle there as well the UK is at the forefront of aspects linked to electric vehicles and plus the recent emissions scandal that affected BW and other car manufacturers as played into our quarters as well because you know companies which is like Johnson Matthey one of the three big manufacturers of catalytic converters it’s playing out well for them and you tend to get these high-tech parts at the premiere of the market and so it’s looking really good for the UK at this stage and you know if you could ask someone 15-20 years ago you know UK automobile manufacturing segment is in trouble they probably shrug their shoulders but it’s a it’s a really important component the economy now yeah yeah okay well to read Marx article in full be sure to check out the I see website later in the week or pick up the new issue on newsstands from Friday next week I’ll be joined by Megan boxall who’s been busy rounding up all the quarterly statements from Big Pharma some of the most defensive stocks post referendum see you again then goodbye


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