Count­down to Brexit: what it means for you and the UK car in­dus­try

What’s go­ing to hap­pen and when? What will be the e ect on man­u­fac­tur­ers, deal­ers and driv­ers? And is any of it go­ing to be good news? By Nick Gibbs

CAR (UK) - - CONTENTS -

The UK’s au­to­mo­tive in­dus­try is un­der se­ri­ous threat from the ‘wrong’ Brexit. So what could hap­pen to car com­pa­nies, to deal­ers and to the cars we buy when we exit the EU on Fri­day 29 March? Right now, un­less the govern­ment some­how ap­peases ev­ery­one and scores a great deal from the EU, it’s look­ing pretty gloomy, es­pe­cially for the 856,000 em­ployed in the busi­ness across the UK. HOW COULD NODEAL CRIP­PLE UK PRO­DUC­TION? UK car man­u­fac­tur­ers like bor­der­less trad­ing with the EU. Their web of sup­plier net­works across Eu­rope in­volves an es­ti­mated 1100 trucks cross­ing the Chan­nel each day, bring­ing parts straight to the assem­bly line at fac­to­ries in Sun­der­land, Cow­ley, Hale­wood, Swin­don or one of the other 32 ve­hi­cle man­u­fac­tur­ing plants in the UK. It’s a del­i­cate op­er­a­tion that any bor­der stop­pages would dis­rupt in a ma­jor way.

A no-deal with­drawal will mean no tran­si­tion pe­riod. That’ll throw sand into the slick parts de­liv­ery sys­tem from Eu­rope and could stop pro­duc­tion lines dead. ‘It’s be­com­ing more and more dif­fi­cult to jus­tify in­vest­ment in the UK be­cause of the un­cer­tainty,’ Jaguar Land Rover boss Ralf Speth told CAR at the Paris mo­tor show. ‘Ev­ery day we build around 3000 cars in the UK. That’s about 25 mil­lion parts. If we miss just one part, we can­not build a ve­hi­cle… and stopped pro­duc­tion will cost us £60m a day.’

HOW AN­GRY ARE CAR COM­PANY BOSSES?

Very. After the vote in 2016, car com­pa­nies were san­guine, say­ing they re­spected the wishes of the peo­ple and would await the out­come of ne­go­ti­a­tions. Two years on and faced with the ‘to­tal in­ep­ti­tude’ of the govern­ment ne­go­tia­tors, as one an­a­lyst put it, the usu­ally mild CEOs are bar­ing their teeth.

‘Hard Brexit is a red line,’ Steve Arm­strong, CEO of Ford of Eu­rope, said in a re­cent state­ment. ‘It could se­verely dam­age the UK’s com­pet­i­tive­ness and re­sult in a sig­nif­i­cant threat to much of the auto in­dus­try, in­clud­ing our own UK man­u­fac­tur­ing op­er­a­tions.’ He hinted that could mean shut­ting down its two en­gine plants (Brid­gend and Da­gen­ham). ‘We will take what­ever ac­tion is nec­es­sary to pro­tect our busi­ness in the event of a hard Brexit.’ BMW has said it could take some Mini pro­duc­tion out of Ox­ford and trans­fer it to the Nether­lands, and JLR’s Speth has warned it could take planned in­vest­ment into elec­tric cars else­where. In ad­di­tion, BMW is so wor­ried it has brought for­ward the an­nual sum­mer shut­down of its Mini plant in Cow­ley to 1 April, a few days after Brexit. ‘While we be­lieve this worst-case sce­nario is an un­likely out­come, we have to plan for it,’ a BMW spokesper­son said.

WHY WILL MAN­U­FAC­TUR­ERS PULL OUT OF UK? There’s no way of know­ing how se­ri­ous the man­u­fac­tur­ers are when they talk of pulling pro­duc­tion in the event of a no-deal. But we do know that a no-deal and im­me­di­ate switch to World Trade Or­gan­i­sa­tion (WTO) rules – with 10 per cent im­port tar­iffs – will hurt car mak­ers ship­ping to or from the EU. ‘Profit mar­gins in our in­dus­try are sig­nif­i­cantly lower than 10 per cent. These ex­tra costs will ei­ther be passed on to the con­sumer or will have to be ab­sorbed by the man­u­fac­tur­ers,’ said Erik Jon­naert of the car mak­ers’ Euro­pean lob­by­ing as­so­ci­a­tion, ACEA. ‘That will put the com­pet­i­tive­ness of our op­er­a­tions un­der threat,’

Toy­ota Mo­tor Eu­rope CEO Jo­han van Zyl said.

The wrong Brexit deal would give man­u­fac­tur­ers the ex­cuse they need to up sticks and leave, par­tic­u­larly given our weaker labour laws com­pared to France or Ger­many. ‘It’s easy to get rid of peo­ple in the UK, so it’s easy to pull out of,’ said David Bai­ley, pro­fes­sor of busi­ness at As­ton Univer­sity. ‘I’m not say­ing that’s go­ing to hap­pen when mod­els are mid-cy­cle, but when they are be­ing re­placed that’s when man­u­fac­tur­ers make those lo­ca­tional choices.’

WHICH PLANTS COULD CLOSE?

• Ellesmere Port, where Vaux­hall makes the As­tra, a model hit by the firm’s re­duced fo­cus on fleet sales.

• Ford’s Brid­gend en­gine plant. Loses JLR as a cus­tomer in 2020. • JLR’s Cas­tle Bromwich plant. Cur­rently on a three-day week after the pop­u­lar­ity of Jaguar mod­els made there slumped. • Honda Swin­don. Re­vived by the cur­rent Civic but vul­ner­a­ble again be­cause of the threat of US tar­iffs.

WHAT WILL NO DEAL DO TO CAR SALES?

A no-deal sce­nario will badly hit al­ready weak­en­ing car sales, ac­cord­ing to mar­ket an­a­lysts LMC Au­to­mo­tive. The firm be­lieves can and van sales would con­tinue to fall, bot­tom­ing out at 2.55 mil­lion in 2020, com­pared to three mil­lion in 2016.

On the other hand, if we man­age to ne­go­ti­ate a nice free-trade agree­ment in­volv­ing an or­derly tran­si­tional pe­riod, that would be enough to halt the sales slide next year and in­crease de­mand to 2.81 mil­lion by 2021. The dif­fer­ence be­tween the two po­ten­tial 2020 fig­ures is huge: 270,000 ve­hi­cles.

ARE THERE ANY REA­SONS TO BE CHEER­FUL?

Well, although new-car sales are down, it’s not by much – deal­ers have been saved by the mass mi­gra­tion to fi­nance, which has soft­ened the blow of the price rises on Eu­ro­zone im­ports caused by the weak pound. This pat­tern is likely to con­tinue after Brexit. Daksh Gupta, CEO of the Mar­shall Mo­tor Group deal­er­ship chain, said: ‘Cus­tomers are used to pay­ing the £300 a month. They like the idea of PCP.’ They just don’t get quite as much for their £300 as they used to. ‘They’ve come down a model or even mi­grated across brands. They’re still buy­ing the cars, but the rich­ness is de­creas­ing,’ he said. That’ll get worse in a no-deal sce­nario – an­other 10 per cent will be wiped off the pound’s value again if we leave with no deal, LMC pre­dicts. So although we’ll still buy cars, we just won’t get as much for our money. Not very cheer­ful after all then.

Mini pro­duc­tion in Ox­ford is at risk ac­cord­ing to BMW, with a move to Hol­land mooted

Brexit is not the only di‹iculty: JLR has been hit hard by re­duced sales in China Vaux­hall’s As­tra plant at Ellesmere Port has been leftvul­ner­a­ble by a re­duced fo­cus onŠleet sales

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