What does a Trump presidency mean for European manufacturers?
Under a Trump presidency, the political climate in the U.S. has become increasingly protectionist. Back in March, the White House announced plans to impose a 25 per cent tariff on steel and 10 per cent on aluminium imports from the European Union, Canada and Mexico. Some analysts had dismissed the tariffs as nothing more than a negotiating tactic to pressure these countries on trade. Nonetheless, the sanctions have since come to fruition. There are concerns over the subsequent rise in costs for end customers and the potential trickledown effect which could destabilise the global economy and negatively impact manufacturers across different industries and verticals.
The tariffs were introduced as part of Trump’s “America First” campaign promise to bring back jobs and could have seen benefits to U.S. manufacturers, such as increased investment in the U.S. military, a national infrastructure makeover and eased regulations on oil and gas. However, the recent decision by the European Union, which will come into effect in August, to impose its own package of retaliatory tariffs on the US, has left trade and cross border relationships hanging even further in the balance.
The U.S. has always been a key trading partner for the EU, whose suppliers exported roughly 5 million metric tons of steel in 2017, so one of the major worries – aside from the ensuing trade war - for UK and European manufacturers is that foreign steel, which would in the past have been exported to the U.S., will find its way to Europe to be sold more cheaply than current market rates.
UK and European manufacturers must ensure they are operating as efficiently as possible and keeping customers highly satisfied by ensuring timely product delivery. In uncertain times like these, it’s crucial to find new ways to optimise business functions and avoid machinery letting customers down when they need it most. As foreign competition grows, maximised product uptime is something that will become increasingly important for manufacturers hoping to succeed in an ever-more aggressive market.
If the trade war continues, manufacturers in Europe will be put to the test. The spotlight needs to be on the often sub-optimised after-sales service aspect of business, in particular. Companies that are unable to meet service demands could begin to notice customers switching to the competition.
Investing in technologies that improve efficiency and the service experience for the end customer is one way manufacturers can respond and adapt to the new tariffs.
Service parts management - ensuring the right part is available at the right place and right time - is critical to a company’s ability to deliver an efficient and effective post-sales service experience. Part availability is the cornerstone of any successful service operation. Although the waters are murky at present, effective planning and forecasting, aligning inventories, resources and processes will stand UK and European manufacturers in good stead to weather the tariff storm.
Manufacturers that optimise their service organisations and invest in the appropriate technologies could see benefits, which include:
- As much as a 20 per cent improvement to gross profits
- Service parts revenue increases between 5 and 15 per cent
- A 10 to 20 per cent improvement in service parts availability
- As much as a 60 per cent reduction in excess service parts inventory
- Between a 50 and 100 per cent increase in productivity
Don’t get priced out
Service parts pricing is another important area to consider when upping the ante against the ever-growing competition. Despite often getting overlooked, it’s a powerful profit leaver which can bring significant revenue opportunities - optimising service parts prices can sometimes be measured in the tens or hundreds of millions!
Today’s most innovative companies that are already leveraging this powerful opportunity are seeing increases in service parts revenue as high as 5 per cent and improvements in gross profits as high as seven per cent.
Remember your dealers!
Finally, for manufacturers with dealer networks, remember your supplier’s risk is your risk. As dealers are often the ‘face’ of many brands, service at the dealer level – whether good or bad – reflects on a company’s overall brand perception.
Ultimately, regardless of how far the tariff war escalates between Washington and Brussels (and the wider world), by ensuring your company is in a position to respond to the kinds of challenges this presents, is going to be the greatest determinate for success in the long run.
Gill Devine is the Vice President for EMEA at Syncron
Timeline: Tesla's Construction of Gigafactories
Tesla's mission to accelerate the world's transition to sustainable energy
Founded in 2003, Tesla was established by a group of engineers with a drive to "prove that people didn’t need to compromise to drive electric – that electric vehicles can be better, quicker and more fun to drive than gasoline cars." Almost 20 years on, Tesla today is not only manufacturing all electric vehicles, but scaleable clean energy generation and storage too.
"Tesla believes the faster the world stops relying on fossil fuels and moves towards a zero-emission future, the better," says Tesla. "Electric cars, batteries, and renewable energy generation and storage already exist independently, but when combined, they become even more powerful – that’s the future we want. "
In order to deliver on its promise of "accelerate the world’s transition to sustainable energy through increasingly affordable electric vehicles and energy products," Tesla's Gigafactory journey began in 2014 to meet its produciton goals of 500,000 cars per year (a figure which would require the entire worlds supply of lithium-ion batteries at the time).
By ramping up its production and bringing it in-house, the cost of Tesla 's battery cells declined "through economies of scale, innovative manufacturing, reduction of waste, and the simple optimisation of locating most manufacturing processes under one roof." With this reduction in battery cost, "Tesla can make products available to more and more people, allowing us to make the biggest possible impact on transitioning the world to sustainable energy."
2014: Giga Nevada and Giga New York begin construction
Born out of necessity to meet its own supply demand for sustainable energy, Tesla began the construction of its first Gigafactory in June 2014, in Reno, Nevada, followed by its Buffalo, New York facility the same year. "By bringing cell production in-house, Tesla manufactures batteries at the volumes required to meet production goals, while creating thousands of jobs," said Tesla.
2016: Reno, Nevada grand opening
Tesla’s construction of Giga Nevada came to an end in 2016, the first of its Gigafactories to complete its construction project. The factory’s grand opening took place in July 2016, and by mid-2018 reached an annual battery production rate of 20 GWh, which made it the highest-volume battery plant in the world that year.
2017: Giga New York begins production
Two years after Tesla’s second Gigafactory began construction, Giga New York was complete, and started its production operations in 2017.
2019: Giga Shanghai construction to production in record time
In 2019, Tesla selected Shanghai as its third Gigafactory location. The company constructed the factory in record time, taking just 168 working days from gaining permits to finishing the plant's construction.
2019: Giga Berlin begins construction
Announced in November 2019, Tesla began the construction of its first European Gigafactory in Berlin. The Gigafactory is still under construction.
2020: Giga Texas begins construction
The following year in August 2020, Tesla began the construction of its Giga Texas factory. The company’s third Gigafactory in the US is still under construction.
2021: Giga Texas and Giga Berlin expected completion of construction
Looking to the future, Tesla expects to complete the construction of its Giga Texas and Giga Berlin factories in May 2021 and July 2021 respectively.