UK: Brexit means no sales record in 2016 and production uncertainty

The decision by UK voters to choose to leave the European Union after 43 years will trigger a “period of uncertainty” according to BMW, who manufactures Mini and Rolls-Royce cars in the UK. Most analysts including myself agree. After smashing its all-time volume record last year to 2.633.533 units, the UK market is set to fall 4% in 2016 amid economic instability and currency volatility according to Equity analysts Evercore ISI. This is to be compared with a pre-Brexit forecast of 3% growth. Given the current 4% year-on-year increase at end-May, this means a 10% drop over the next 6 months until the end of the year, which is also the decline rate Evercore ISI is predicting for the Full Year 2017, leading to a 2.5% percent fall in European production.

Troubled waters ahead: UK’s largest carmaker Jaguar Land Rover, and BMW though its Mini and Rolls-Royce operations.

A June 2016 survey by independent pollster ComRes showed 77% of members of the trade body for the UK automotive sector, the Society of Motor Manufacturers and Traders (SMMT), said remaining in Europe would be best for their business. Throughout the campaign, all carmakers with operations in the UK had multiplied the warnings that a Brexit would impact negatively both sales and production in the country. Now that Brexit has become a reality, the industry is bracing for troubled waters ahead. Mike Hawes, SMMT Chief Executive, said: “The British public has chosen a new future out of Europe. Government must now maintain economic stability and secure a deal with the EU which safeguards UK automotive interests. This includes securing tariff-free access to European and other global markets, ensuring we can recruit talent from the EU and the rest of the world and making the UK the most competitive place in Europe for automotive investment.”

Built in Sunderland, Tyne and Wear, the Nissan Qashqai is the #1 UK-made export to the EU.

The UK automotive industry is mainly owned by foreign manufacturers including Nissan, Toyota and Honda, who set up factories in the UK mainly to export to the EU. Tata Motors’ Jaguar Land Rover remains the UK’s largest carmaker, but is followed closely by Nissan, present in the UK for 32 years and manufacturing 475.000 cars annually, notably to hot-seller Qashqai, most of them for export inside the EU. Sunderland in northern England, where Nissan has its operations, was among the constituencies that surprised pundits by voting for Brexit. This quote by AN Europe.

Toyota manufactures the Auris for the EU in Burnaston, Derbyshire.

Toyota, a local manufacturer for the past 24 years, warned its employees that the UK’s withdrawal from the EU may lead to levies of as much as 10% on the cars it builds in Britain. The Japanese carmaker exports 90% of the vehicles it manufactures in the UK, and 75% of these are sold in the EU. One Asian automaker executive with manufacturing capacity in Britain, speaking on condition of anonymity to Automotive News Europe, said: “We don’t have any choice but to be more cautious with our investment decisions, including moves like whether to produce a new or significantly redesigned vehicle model in the UK.”