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Expanding into European markets

The German automotive industry has a well-deserved reputation for productivity and reliability, so it is a hugely positive sign for UK industry when a small British company is able to successfully set up a factory there.

Midlands based Automotive Insulations has done just that. In fact, the company, who manufacture thermal and acoustic insulation materials for vehicle parts, has had its most successful few years ever. This has enabled the expansion into overseas markets. After a period of recession defying rapid growth, we were looking to end our dependence on one market/customer. Having identified an over exposure in the UK automotive market, we realised the massive potential for repeating our core business in various European markets, particularly Germany.

The German factory is the companys second overseas site with the first one set up in Sweden at the end of 2012.

Learning lessons from experience

I have learned some valuable lessons from setting up factories in diverse European markets, not least the importance of having the right local partner. In both Sweden and Germany, we chose to work with organisations that had been known to us for several years prior to setting up joint operations. Having a local partner has enabled us to learn about the culture and provided us with a wide and well established network in the area. A partners existing knowledge can also help ensure compliance with local laws and as facilitate access to any available support and grants.

The foray into overseas markets has been directly instrumental in the companys rapid growth over the past two years. Setting up abroad has enabled us to grow our company in a way that we would have struggled to achieve by focusing solely on the domestic market. We found that our products would sell if we were actually in place in the local market with a manufacturing and warehouse base.

Opening up new markets

Sweden now supports the UK sites by taking on work that the company had previously placed with a German supplier. The newly opened German site is currently manufacturing materials for car production in Germany and for Automotive Insulations UK headquarters in Rugby as well as producing materials for the construction and specialist vehicle markets. This will enable us to develop a forward looking European-wide sales strategy at the same time as expanding our product range into new non-automotive sectors.

Tips for success

Having been through the process twice, here is some valuable advice for other companies considering setting up overseas.

  • Ensure that the day to day running of your UK business is sound;
  • Write a realistic business plan which will help you access the finance that you need;
  • Be well prepared and carry out a proper risk analysis with your team. You dont need to have all the answers but having identified potential problems will help you deal with any issues that do arise; and
  • Get a reliable local partner who has access to good local networks and who can help ensure compliance with local laws. In Germany, our partners put us in touch with local inward invest teams who assisted in finding everything from property through to people and licences in fact, almost everything needed to start a business. And best of all, it was free.

Whilst the engineering sector is suffering skills shortages in some key areas, we found the recruitment of qualified staff relatively straightforward. Both the UK and German have very business savvy workforces. Although skills shortages exist in Germany just as they do in the UK, we have not found this a problem so far. In fact, we are attracting very highly skilled and very willing staff in both Germany and Sweden.

Some might say it’s a risky strategy to set up a business manufacturing parts for vehicles in Europes most prolific automotive market, but the UK can more than hold its own. I dont think there is too much difference between the German and British automotive industry. In fact, we have some of the most innovative products made right here by companies such as Jaguar Land Rover.

At times it has been a daunting process, but it has also been exciting and the results have made everything worthwhile. We have been able to expand in a way that would have been much slower and more unlikely had we restricted ourselves to the British market. I have no doubt that this is only the start.

Jim Griffin is MD of Automotive Insulations.

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