UK Automotive: The Road Beyond Brexit

Automotive is one of the sectors most vulnerable to a no-deal Brexit. With the deadline only weeks away, here’s what could be in store – with a focus on German brands in the UK.

German BMW in British City of Bath

Do you own a German car? Then you may want to keep hold of it. It could prove to be a sought-after rarity in years to come.

Why do I say this? Well, the European automotive industry has dropped to its knees and begged for mercy from the consequences of a no deal Brexit. Signatories from across the European automotive industry bodies have united to stress their concern.

These statistics give a sense how seismic the no deal impact could be:

  • Within the German automotive Industry alone, the UK has over 100 production facilities
  • On average, a single vehicle consists of circa 30,000 parts; most have to cross European borders multiple times in the manufacturing process
  • According to Reuters, in 2016, Britain was the largest single export market for the German automotive industry, taking 800,000 cars (20% of Germany’s global exports)
  • A no-deal Brexit would impact circa 526,830 employees in the UK automotive industry, which is up to 5% of current employment
  • No deal could cause the imposition of tariffs of 10% on cars and 4.5% on components imported into the EU from the UK, as well as potential delays at the border

This isn’t just automotive big wigs selfishly catastrophising. Car makers have been showing signs of strain over the last 12-18 months. Jaguar Land Rover have axed 4,500 jobs, Honda are closing their long-established Swindon plant, Nissan cancelled plans to build the new X-Trail model in Sunderland and Ford are cutting up to 1,000 jobs at their Bridgend Engine Plant.

So, what does the road look like beyond Brexit?

With some German car makers forecasting a 10% increase on the list price of their cars at retail, the days of affordable German cars may be gone.

Over the last couple of decades, British consumers have been driving away Audis, BMWs and Mercedes on PCP and lease hire agreements. All it takes is a modest initial deposit and affordable monthly payments (before this, a German make on a British road was very much an indicator of the driver’s net worth).

Clever retailing/financing can only achieve so much. Without doubt, greater access to these cars was only possible thanks to the open border with Germany keeping import costs down. There is also now concern over the effect of no deal on maintenance, with the import cost of parts being passed down the line to the car owner.

The evidence certainly suggests that no deal would hinder automotive noticeably. But there is still faith in the future. Ford of Europe CEO, Steve Armstrong has provided some reassurance by stating that “nothing would be off the table in a hard Brexit.”  Hopefully, in the words of Bentley CEO, Adrian Hallmark, “Common sense will prevail,” and once the EU exit has happened, automotive manufacturers will adapt accordingly.

It will be very interesting to see how the coming weeks and months play out.

Continuing the Brexit conversation. I’d be keen to hear opinions from other people in the industry. If you're interested in sharing your views, please get in touch.

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