British motor industry is more about service than manufacturing nowadays

The myth is that carmakers are major manufacturers. That was why ministers battled last week to rescue jobs at LDV, Jaguar, Land Rover and Vauxhall. But that fact is the motor sector is a service industry: far more people sell and service cars than make them.

Ford employs 13,000 people making engines and vehicles – but 22,000 in its dealerships. Vauxhall, the UK subsidiary of the troubled General Motors, employs 5,500 people producing Astras at Ellesmere Port and vans at Luton; it supports another 7,000 people at supplier companies, but there are 23,000 jobs at dealers.

The industry's trade body, the Society of Motor Manufacturers & Traders, claims the sector employs more than 800,000 people but only 180,000 in manufacturing, with another 106,000 making components. That leaves more than half a million people in showrooms, service bays and elsewhere.

In the 1970s, British Leyland alone employed nearly 200,000 people. UK car production remained fairly constant until the credit crunch but productivity has risen as workforces shrank. Yet despite the collapse of Rover in 2005, Britain now has seven volume carmakers – including Honda, Nissan and Toyota – and BMW, which makes the new Mini at Oxford.

There are 27 vehicle manufacturers in the UK including specialist car firms such as Morgan at Malvern and Caterham in Dartford, plus lorry and bus firms such as Plaxton in Scarborough and Alexander Dennis in Falkirk. There are also more than 2,000 companies making components such as windscreens and tyres. "The UK is home to Europe's most diverse and productive vehicle manufacturing base," says the SMMT. Some 19 of the world's 20 top parts suppliers have UK factories, including GKN and Pilkington.

What Britain does not have, however, is a UK-owned mass motor manufacturer. Ford, the American-owned market leader, opened its first British assembly line in 1911 and foreign firms have gradually acquired the other main carmakers, including Rolls-Royce, Jaguar, Lotus and Aston Martin. Even the remnants of Rover were sold to China. Of British Leyland's commercial divisions, the Lancashire lorry plant is now US-owned; the buses went to Volvo and LSV might be swapping Russian ownership for Malaysian. Such parentage means prestige jobs including design and research are increasingly located at the foreign owners' overseas operations.

Thus the Department for Business established a New Automotive Innovation & Growth Team two years ago under former Ford vice-president Richard Parry-Jones to seek ways to return top motor industry jobs to Britain. Last week, he produced a report calling for a new industry-government Auto Council.

Mr Parry-Jones hopes to rebuild the British industry on a base of advanced technology. "The auto sector in the UK has transformed itself into a world-class industry with superb design and engineering skills, high productivity, and product reliability that rivals the best in the world," he says.

UK demand for cars is expected to fall to 1.72 million this year. But while four-fifths of cars sold in Britain are made abroad, three-quarters of UK production is sold overseas. Cars and lorries account for half the country's manufacturing exports. Ford no longer builds cars at its Dagenham site but it exports most of the million engines made each year. Indeed, the three million engines built by all British companies far exceeds the number of cars produced or purchased.