Deal or no deal? What does Brexit mean for the UK car industry?

With the continuing uncertainty that surrounds the Brexit issue, there is one thing that stands out – uncertainly is not good for the motoring industry. With many manufacturers voicing their concerns and even withdrawing production from the UK altogether, can change be good? And, ultimately, where will this all end?

 

The SMMT have stated that they want to work closely with the government to make sure that the “interests of [the] sector, jobs and investment are safeguarded and future competitiveness of this industry is secured.” But with turmoil at the very heart of Westminster, that is easier said than done.


Free-Flow of Goods


Perhaps the issue of most concern is the free-flow of goods across the border. As part of the EU, this was not an issue for the UK. Under a Brexit scenario however, this will change. Costs in future tariffs alongside the need to strike new deals can be seen as a negative issue. The counter argument is the opportunities that world-wide, unrestricted trading will give to the industry.


Another concern put forward is potential problems with the ‘just-in-time’ manufacturing process. Having to cope with making storage and warehouse provision, together with increases in transport times across restricted borders is a negative. But having to adapt to new working practices will create new jobs and improve prospects in local economies. Yes, change can be good.


UK Production


With UK car manufacturing suffering another decline in January this year and volumes falling by 18.2%, is this purely down to Brexit or other factors? Mike Hawes, Chief Executive of the SMMT says the decline was a result of model changes and weaker demand in both the UK and key export market. He added: “Another month of decline is a serious concern. The industry faces myriad challenges, from falling demand in key markets, to escalating global trade tensions and the need to stay at the forefront of future technology. But the clear and present danger remains the threat of a ‘no deal’ Brexit, which is monopolising time and resources, undermining competitiveness.” [1]


It’s not all doom and gloom for UK production with Toyota starting production of its new Corolla at its Derbyshire factory back in January. This follows Toyota’s announcement of a £240 million investment in to the Derbyshire factory, with new equipment, technologies and systems. [2]


Car Prices on the Rise?


The most obvious concern for the British motorist with Brexit looming is – will it cost more to buy a car? With this is mind, Carwow have created an online tool[3] which aims to predict the prices of cars after Brexit. Using a collection of data sources, it predicts that customers’ fear’s may be spot on with the prices of Honda, Hyundai and Fiat set to increase between £2500 and £3000, with higher end makes such as BMW and Audi increasing over £8,000. Although, some makes didn’t fare too badly with the average price of a new Ford increasing by £727. Could Brexit be blamed solely for these price increases or can demand in new technologies contribute as well?


Future Regulations


One factor that the SMMT has highlighted as a key issue is the “future influence on regulations affecting the UK automotive industry.” This is a tricky subject, one that is not helped by the seeming paralysis in the Parliamentary decision makers. This does hold to an assumption that the current situation is the best, if not the only, way to go forward.


Brexiteers would argue – quite strongly, that change is the better scenario. That the UK needs to leave the EU and strike out on its own, trading with a world that is flowing with milk and honey.


Yet it’s true to say, that the current uncertainty could lead to a second referendum, or an election or another hung parliament with ultimately, the UK remaining in the EU. And, what will people make of that?


Hindsight will tell whether this is to be the best of times or the worst of times. The thing that will best suit everyone, is for a decision to be made so that we can move on. There shouldn’t be a need to fear change, if it is handled correctly.


 


 


Sources: [1] https://www.am-online.com/news/market-insight/2019/02/28/uk-vehicle-production-declined-182-in-january


[2] https://www.am-online.com/news/car-manufacturer-news/2019/01/14/toyota-starts-uk-production-of-new-corolla


[3] https://www.carwow.co.uk/car-prices-after-brexit


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