The UK’s decision to leave the EU was officially announced on June 23th 2016, yet there’s still no consensus on the impact Brexit will have on the UK automotive market. Whether a deal is reached or not, there are sure to be repercussions for the companies that work in the industry.
There are five big automotive manufacturers in UK: Jaguar Land Rover, Vauxhall, Nissan, Mini and Aston Martin. All of them are at risk due to the adverse impact of Brexit, and will likely suffer profit loss, factory moves or closure, and efficiency reductions as they struggle for parts.
Jaguar Land Rover is one of the most famous manufacturers of luxury cars operating today. Their sales have already been hit by Brexit uncertainty, causing a temporary shutdown of their UK factories earlier in April. The company uses around 25 million parts per day, and expect that a bad Brexit will massively disrupt their ability to create cars at a competitive rate.
Vauxhall has said that they will not hesitate to shut factories or lay off staff if Brexit eats into their profit margins. Having enjoyed steady sales for years, they fear Brexit will disrupt their capability to meet deadlines.
Nissan made the headlines when it announced it would not be building its new X-Trail model in their Sunderland plant in the UK as had been previously planned. This is Britain’s biggest car manufacturing plant, making around 2,000 cars a day.
The Mini is a British icon, and has been owned by BMW since 2005. If there is no deal, BMW has announced that the Mini plant in Crowley which employs 4,500 people may be closed. The best case scenario is that the main plant would remain in the UK, but engine production would be moved to Austria. Even this would still damage the brand, and cost UK automotive engineers their jobs.
Aston Martin is a luxury brand, most famous for producing cars used in the James Bond movies. Even they aren’t safe from Brexit. They’ve already set aside millions to fund contingencies in the event of a no-deal Brexit. They’ve accessed different supply chains, stockpiled parts, and are prepared to lower the price of their cars to offset potential profit loss.
In 2018, car production in the UK fell 9.1%. All the automotive companies have been stockpiling parts for months, anticipating delays in orders, or expensive tariffs. In order to offset the expenses linked to the Brexit, JLR are looking at reducing salaries by 10% to keep on track.
Other manufacturers like Aston Martin have already anticipated change by hiring a new supply chain & logistics director, looking to broaden their options and have more opportunities to expand beyond the EU.
However, at the time of writing, no one truly knows how Brexit will change the automotive industry. If a deal is reached, it could be that the supply chain is not disrupted, and tariffs are not implemented.
However it seems increasingly unlikely that the industry will emerge intact, with large amounts of damage having already been done.