Customer Logins
Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Customer LoginsNissan commits to Sunderland site
After a great deal of speculation in recent weeks, Nissan has announced that it has decided to commit next-generation vehicles to its Sunderland (United Kingdom) site.
IHS Markit Perspective
- Significance: Nissan has announced that it has decided to build the next generation Qashqai and X-Trail models at its Sunderland facility.
- Implications: This brings to a swift end the speculation that has taken place during the past few weeks that the Japanese automaker could have moved one of its key models to another facility in the wake of the UK's vote to leave the EU.
- Outlook: The news is certainly positive for the UK automotive industry and part of its supplier base. It now remains to be seen how production is envisaged to reach the 600,000-unit level which is said to be planned.
After a great deal of speculation in recent weeks, Nissan has confirmed that it will retain production of the next generation Qashqai crossover at its Sunderland (United Kingdom) facility as well as adding its X-Trail sibling. According to a statement, the decision "follows the UK government's commitment to ensure that the Sunderland plant remains competitive." It added that as a result, the automaker will not only increase its investment but maintain a headcount of over 7,000 workers at the site.
On the announcement, the chairman and chief executive officer (CEO) of Nissan, Carlos Ghosn, was quoted as saying, "I am pleased to announce that Nissan will continue to invest in Sunderland. Our employees there continue to make the plant a globally competitive powerhouse, producing high-quality, high-value products every day." He added, "I welcome British Prime Minister Theresa May's commitment to the automotive industry in Britain and to the development of an overall industrial strategy."
This was followed by UK prime minister Theresa May being quoted as saying, "This is fantastic news for the UK. Nissan is at the heart of this country's strong automotive industry and so I welcome their decision to produce the Qashqai and a new model at their Sunderland plant." The senior politician noted that it was "recognition" for the government's commitment "to creating and supporting the right conditions for the automotive industry so it continues to grow – now and in the future." May added that the government "will continue to work closely with employers and investors in creating a global Britain."
The UK's secretary of state for Business, Energy and Industrial Strategy Greg Clark was also quoted by BBC News as saying that not only had Nissan committed to build these two vehicles, but that it had also "decided to upgrade their factory to a super-plant, manufacturing over 600,000 cars a year." Further reports are suggesting this will result in an additional shift on one of the production lines at the site, as well as requiring up to 1,000 additional workers.
Separately, a senior executive at Toyota has said that he does not see the Brexit vote being a trigger to moving production out of the UK. The automaker's chief competitive officer and chairman of its European operations, Didier Leroy, was quoted by Reuters as saying, "It will be a big negative impact in terms of competitiveness if we have a trade tax," and that maintaining competitiveness and free access to the EU is crucial for its UK operations. However, he added, "But at the same time, does it mean that we should give up [producing in Britain]?... I can tell you that we won't give up and move to another country just because it will be easier. We have a fighting spirit and have trust in the people at our UK plant." Leroy also trusted the UK government to offer "fair treatment" for all companies to mitigate the impact of the vote.
Outlook and implications
The news finally brings to an end concerns over whether Nissan would choose to build future vehicles at its Sunderland facility or move them elsewhere in the wake of the Brexit vote. The factory currently employs around 7,000 staff, with a further 55,000 workers said to be linked to the site. Discussions have largely been focused on the replacement for the Qashqai compact crossover which is its key model at this location, with production in 2015 hitting 299,000 units and making up almost 63% of the site's production. Around 80% of this model built at the site are exported, many to the EU. Production of the third generation was due to start in late 2019 according to IHS Automotive forecasts, Nissan seems to have been keen to push to secure the future of this facility. This is despite the fact that Article 50 of the Lisbon Treaty - the process by which the UK will extract itself from the EU - has yet to be triggered by May, and terms of negotiation not yet having been decided.
What is noticeable by its absence in this announcement is the terms by which the UK government got Nissan to agree to its commitment. Indeed, there has been a number of options which were said to be being considered by civil servants. However, Clark indicated there had been no offer of financial compensation or state aid, telling BBC One's Question Time programme, "There's no cheque book. I don't have a cheque book". However, he declined to comment on a report in The Times which suggested that Clark gave a letter to the OEM which "is regarded by Nissan as a promise that it will not have to bear the cost of punitive tariffs on car exports if Britain leaves the EU customs area without a free trade agreement in place". Nissan's senior vice-president for Manufacturing, Supply Chain Management and Purchasing in Europe, Colin Lawther, denied there was a "special deal," telling the BBC, "It's just a commitment from the government to work with the whole of the automotive industry to make sure the whole automotive industry in the UK remains competitive... We would expect nothing for us that the rest of the industry wouldn't be able to have access to. We see this as a whole industry thing, not a Nissan thing."
Even so, whatever the template is for Nissan, other businesses inside and outside the automotive sector are likely to be looking to emulate it if they are to commit to further investment.
As for the Sunderland site now, the 600,000 unit per annum (upa) output that has been earmarked would be a substantial increase from the 510,500-unit record that the site achieved during 2012. However, as IHS Automotive senior production analyst Ronan Noizet notes, the factory is currently tooled to manufacture vehicles at this rate. The question is how it plans to reach this level. Under our existing scenario for the site, we anticipate that Line 2 will meet EU demand for the next-generation Qashqai (over 250,000 upa) and X-Trail (over 40,000 upa) from 2020, alongside the Leaf electric vehicle (EV). However, with Line 1 building both the Nissan Juke and Infiniti Q30, production is forecast to reach over 200,000 units on average. One option could be to turn the site into a production centre for compact crossovers based on the same CMF C/D architecture by shifting them from some other sites. However, it remains to be seen now whether Nissan will change its strategy for the site on the back of this commitment.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.