Economy, Auto

Automakers Panic Over Brexit

Automakers Panic Over BrexitAutomakers Panic Over Brexit

Automakers with operations in the UK are weighing the implications of the country’s vote to quit the EU amid warnings that Brexit will impact sales and production in Europe’s second-biggest auto market after Germany.

BMW, whose Mini and Rolls-Royce units build cars in the UK, warned of a “period of uncertainty” but said there will be no immediate change to its UK operations, according to Auto News Europe.

Many conditions for supplying the European market will now have to be renegotiated, BMW said in a statement.

“We cannot say what this means for our UK operations until those future regulatory and legislative arrangements are agreed,” the German premium automaker said.

The UK auto industry is mostly owned by foreign companies, including Japan’s Nissan, Toyota and Honda, which all have car factories in England. Nissan and Toyota have warned that Brexit could impact future investments in the country.

Toyota on Monday 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. Toyota exports almost 90% of the vehicles it builds in the UK and three-quarters of the cars are sold in the EU.

Germany’s VDA auto industry association on Thursday warned that a potential trade dispute between Europe and the UK in the aftermath of a Brexit could put British production sites at risk.

“The German auto industry alone has 100 production sites in Britain, including suppliers,” said Matthias Wissmann, VDA president. “If there were a trade conflict between Britain and the EU, the damage would be enormous for everybody.”

Equity analysts Evercore ISI repeated its warning that Brexit will hit UK and Europe-wide car sales, as well as production.

Evercore expects UK car sales to fall 4.5% this year amid economic uncertainty, instead of its pre-Brexit forecast of 3% growth, and plunge by 10% next year, leading to a 2.5% fall in European production in 2017.

The UK is one of the EU’s strongest and most profitable markets for new cars, Evercore automotive research head Arndt Ellinghorst noted.

  Germany’s Biggest Market

The UK is the biggest single export market for German automakers, said Matthias Wissmann, head of the VDA, the country’s auto industry association.

“Europe’s politicians must now work to keep tariff-free trade between the EU and the UK,” he added.

Wissmann said half of the UK’s 2.6 million annual new-car sales is built by German-owned companies and Germany exports about 810,000 passenger cars a year to Britain.

About 57% of the 1.6 million cars built in Britain in 2015 were exported to EU countries and the German auto industry has 100 production sites in Britain, including suppliers, 30% more than in 2010, according to the VDA.

Volkswagen Group said it is too early to assess the impact of the vote on its Bentley UK-based ultra-luxury brand or on sales in its second-biggest European sales market after Germany.

Daimler CEO Dieter Zetsche said he did not expect any impact on the maker of Mercedes-Benz cars.

“This is not a good day for Europe and in my view, certainly not for the UK,” he said in an emailed statement.

“Geographically, the country may be an island; politically and economically, it is not. It is now even more essential that Europe does not continue to drift further apart.”

  Britain’s Aston Martin on Brexit

UK luxury sports-car brand Aston Martin urged the British government to secure tariff-free access to EU markets.

“Aston Martin will now orientate its business to deliver our midterm plan in the context of the exit and the market volatility that may exist during the period of transition,” CEO Andy Palmer said.

“A weaker pound should partially offset the increased instability.”

Palmer warned on Friday that Britain’s exit from the European Union was likely to require additional “productivity and efficiency” gains at the British sportscar maker.

“We acknowledge the decision and the rule of democracy,” Palmer said in a statement to Reuters after Britain’s referendum vote to leave the European Union.

“As the UK could now be subject to new trade tariff barriers, we also anticipate the need for additional productivity and efficiency in the medium term,” he said.

The government must now “maintain economic stability and secure a deal with the EU, which safeguards UK automotive interests”.