Car industry's future could be a racing cert

If anyone 25 years ago had been shown what would happen to the British car industry over the past quarter-century they would have been ... well, what would they have been?

They would have been aghast at what has happened to British Leyland, and they would be astounded at the ending of car assembly at Dagenham. But they would surely have been impressed by car production last year, higher than at any stage in the previous 25 years, by the new factories that had sprung up for Nissan, Toyota and Honda and by the very good labour relations. The saga of "Red Robbo" would be a distant, sad memory.

They would, perhaps, be surprised by two things. The first would be the failure of the Government's intervention in the fortunes of British Leyland. It was rescued by the Labour government, and many outside government reckoned turning the company round would be a tall order. But few could have predicted just how disastrous that intervention would be.

They would also probably be surprised that the basic design of the car, with a petrol engine, was unchanged in those 25 years. The first oil shock was in 1975 and it seemed the industry would have to replace oil as its basic fuel.

Now fast-forward to 2025. What, on the basis of the experience of the past 25 years, should we expect from the next quarter-century - and assuming those conclusions are not completely up the spout, what lessons might be drawn from them?

The last two points suggest two easy answers. Yes, the internal combustion engine will still dominate our world, though it will be nearing the end of its reign and a replacement, perhaps fuel cells, will be emerging. And yes, were this Government foolish enough to try to intervene in the motor industry, its efforts will have been shown to be equally ineffectual. Governments can do many things but shaping the car industry is not one of them.

The more difficult part is making a best guess at the shape of the industry a generation hence. My best shot is this. First, there will still be mass- manufacturing of cars in Britain. The output will be lower and employment much lower.

Not that there will be waves of plant closures, but the demand for cars through Europe will be lower. Already Europe has 25 per cent over-capacity. Demand will be lower partly for demographic reasons, as a much older population will tend to drive less and be change vehicles less. Quality will be higher so there won't be much need to change. Until and unless there is some great technological leap, the mass market for cars will be simply for replacement, rather like washing machines now, and a stagnant one at that.

Employment will fall because manufacturers will figure out simpler and cheaper ways of assembly. They will be under great pressure to squeeze costs and will outsource more of the manufacturing process to achieve that. Component makers will find themselves particularly squeezed.

So mass-manufacturing of cars will continue but it will not be a great business to be in. But craft manufacturing of cars will experience significant growth. If incomes continue to rise and if mass-manufacturing continues to be squeezed, the window for craft manufacturing will grow. Thus the Morgans and TVRs, at present a tiny segment of the market, will find they have a larger market to play for. Providing they do not goof, they and others like them will find themselves in a potentially prosperous niche.

The other craft area of expansion will be in design and consultancy. I would expect the British dominance of Formula One manufacturing to spread further so the cluster of companies involved in it employ double or three times their present numbers.

Overall guess of the size of the UK car manufacturing business in 2025? In terms of total employment, smaller than now; but in terms of added value, larger. The smaller workforce will be much better paid because it will have either craft skills or - in the mass market - have to be paid better to attract people to the industry during a period of strong general demand for labour.

Physically the UK industry will be clustered round its present areas of success. These will include the Japanese-owned assembly plants of Toyota, Nissan and Honda (though both Nissan and Honda will no longer be independent), and the south-east stronghold of the racing car manufacturers. The future for Longbridge and Dagenham will turn on the ability of those areas to attract new industry, rather than try to retain an old one. Something of the motor industry may remain, but not much. The key to success will be in what springs up in its place.

If this outlook is more or less right, what conclusions would flow from it? The first is that no one should be gloomy about the UK car industry, despite the plight of Dagenham and Longbridge. Just as the overall position of the industry now must be a bit better than the pessimistic observer might have expected 25 years ago, so the position in 25 years will be better than the pessimists today appreciate. The industry will be different, maybe smaller, but successful in a modest way.

The second conclusion is that from a policy point of view we should try to reinforce success rather than patch failure. There are some bits of the industry, of which Formula One is the most obvious example, at which the UK is astoundingly successful. (Not too good at staging the actual races to judge by last weekend, but let that pass.)

So the prime, driving aim of the Government should not be trying to save assembly at Dagenham but to boost the racing car end of the industry. It should listen to what the success-stories want and try to help them. Jobs will follow.

And the third thing is that the Government and interested bits of the private sector should try to think laterally about the best ways to use the human and physical resources of the old mass-manufacturing areas. The transformation of London Docklands into a hive of business ranging from light industry to top financial services shows how the physical landscape of an area can be transformed.

That is not necessarily the right model for Longbridge - in fact it is probably the wrong one - but it is a good example of thinking outside the box.