UK car manufacturing, imports and exports puzzle - a possible explanation.

From the European Automobile Manufacturers Association, shortly before GBP fell with a corresponding boost to exports/fall in imports:

80% of the UK’s automobile production is exported, of which 52.8% (worth €14.6 billion) goes to EU member states. The other way round, the EU represents 81% of the UK’s motor vehicle import volume, worth €44.7 billion.

In very round numbers and to exaggerate a bit, all cars manufactured in the UK are exported and all the cars we drive are imported. There is a huge amount of churn involved. This has been bugging me since Mrs W bought a new Ford Kuga last year which was shipped in from Spain, not made in Dagenham (any more).

A possible explanation occurred to me recently. Basically, manufacturers like big factories. Instead of having small factories dotted around Europe, they prefer making all their cars in the same place. So each country ends up with a handful of huge factories, each making a narrow range of cars. We all know that Germany punches above its weight here, but even their manufacturers have shifted a lot of production to Spain or their eastern neighbours to keep costs down.

Different people want different kinds of car. In olden times, there were lots of smaller manufacturers in each country, making lots of different models, so the chances were you could find something you liked made in your home country. But nowadays, wherever you are in Europe, if you want a Nissan or a Honda, it will be made in the UK; if you want a Ford, it will be made in Spain; if you need a car to bully people on the motorway, it will be made in Germany, and so on.

In other words, more specialisation leads to more trade (obviously).

This is thus also a distant cousin of comparative advantage, I suppose. The effect works on a national, continental and global level. The UK (like most EU Member States) exports far more cars to places outside the EU than it imports from outside the EU.  Or to put it another way, European countries are the best at car manufacturing, that’s the Premier League, but within that Premier League, the UK is hovering a few places above the relegation zone.