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
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 NODEAL 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 diiculty: JLR has been hit hard by reduced sales in China Vauxhall’s Astra plant at Ellesmere Port has been leftvulnerable by a reduced focus onleet sales