Well, to those that have suggested that Brexit is but a minor issue and that self-interest and common-sense geopolitics would yield little negative impact to the UK economy – someone should tell the UK automobile industry to not worry. And from what we’ve been hearing from non-automakers there is fairly widespread concern in the corporate community about potential impacts of Brexit to trade.
The two articles below tell a sobering story about how concerned auto execs about the anticipation of Brexit. Nissan is currently considering a decision to expand its Sunderland production facility, which would combine Micra and Qashqai model manufacturing lines. For the past decade or more, that Sunderland plant has been the largest auto production facility in the UK and has been a very important employer in the North of England. Carlos Ghosn has threatened that Nissan’s demand to be indemnified by the UK Government against the potential negative impacts of Brexit and without that guarantee, that perhaps Nissan would choose another manufacturing site outside of the UK.
Seeing this, Jaguar Land Rover has now offered that will “realign its thinking” on investment after Britain’s vote to leave the EU and if Nissan gets a Brexit compensation deal then other automakers would need a level playing field.
This isn’t good. Together JLR and Nissan account for the production of about 1M vehicles or about two-thirds of all UK vehicle manufacturing and overall the UK auto industry has been enjoying great success. Both companies are foreign-controlled and seeing as most of the UK auto production is exported (mostly to Europe and North America), this has got to represent a real problem for UK economic development. And beyond the considerations of those two firms, what will become of BMW/Mini, Toyota, General Motors and Honda which also have production in the UK – or importantly the dozens of auto parts and component manufacturers that support OEM and aftermarket?
These corporate investment decisions will have massive impacts throughout the sector and the wider UK economy. Beyond the direct impacts, the logistic and property sectors will be watching closely as there have been some very significant investments made in anticipation of continuing growth in what has been a very strong industry. The outcome of these issues may impact the fortunes of the Liverpool SuperPort proposition, for example.
We see these risks as a whole system and are closely following the specific supply chains that will be most impacted by Brexit. More from GLDPartners over the coming months. Please see the articles mentioned below.
After Nissan ultimatum, Jaguar Land Rover says Brexit must be fair for all: Reuters
http://www.reuters.com/article/us-autoshow-paris-jaguarlandrover-idUSKCN1201FK
Jaguar Land Rover (TAMO.NS) will “realign its thinking” on investment after Britain’s vote to leave the EU and if Nissan gets a Brexit compensation deal then other automakers would need a level playing field, Britain’s biggest carmaker said.
Chief Executive Ralf Speth also told Reuters on Friday that there were signs that some customers in Europe, Jaguar Land Rover’s biggest market, no longer wanted to buy British cars. Speth responded to comments by Nissan (7201.T) Chief Executive Carlos Ghosn, who said on Thursday he would halt new investment in Britain without a pledge of compensation for tariffs imposed on UK-built cars in the event of a ‘hard Brexit’.
“We are the only car manufacturer in the UK to do all the work in terms of research, design, engineering, production planning in the UK,” Speth said. “We want to have fair treatment and a level playing field at the end of the day,” he told Reuters by telephone from the Paris auto show. Britain is not expected to begin formal divorce talks from the European Union until 2017, which will last two years, but there are growing concerns among carmakers about the implications of a ‘hard Brexit’, which would leave firms paying tariffs to export UK-assembled cars to EU markets.
Carmakers Nissan and Toyota both warned on Thursday that tariffs could hurt production in Britain and Volkswagen-owned brand Skoda urged Britain, Europe’s second-largest car market, to clarify the situation as soon as possible.
Britain’s business ministry did not respond to multiple requests for comment.
Speth said Jaguar Land Rover (JLR), which built one third of Britain’s 1.6 million cars last year, would face a double hit in the event of ‘hard Brexit’ with tariffs on exported cars and imported parts and technology hurting competitiveness. “If we face higher tariffs than anybody else then it’s quite clear that it’s reducing the competitiveness of our products especially in Europe,” he said. “The order of magnitude cannot be calculated right now.”
Two sources told Reuters in June that the firm estimates its annual profit could be cut by 1 billion pounds ($1.3 billion) by the end of the decade if Britain returned to WTO tariffs of 10 percent, according to internal documents. Speth also raised concern that some European consumers might be shunning British brands in the wake of the Brexit vote, referring to comments by European sales representatives.
“They have the very first customers in their showrooms (who) clearly highlight that they don’t want to buy British products any more,” he said. Any blow to the British car industry, which was dogged by wild-cat strikes and poor productivity in the 1970s and 1980s, could undo years of recent progress with output currently expected to reach a record high of 2 million by 2020.
JLR said its long-term investment strategy has not changed as a result of the vote but the firm would now have to think again after Britons backed leaving the European Union on June 23.
“We have to realign all of our thinking and work on how to handle this Brexit best,” Speth said. Asked if that included investments, he replied: “Everything.” Over 800,000 jobs depend on Britain’s overwhelmingly foreign-owned car industry and big carmakers backed continued membership during the campaign, seeing benefits from open trade and standardized rules.
Britain’s car industry body the Society of Motor Manufacturers and Traders warned on Friday that a lack of clarity over a potential deal risked future growth. “The current uncertainty is not conducive to attracting manufacturing investment to the UK,” Chief Executive Mike Hawes said.
However, Speth left open the possibility of new investment in Britain such as an electric battery and car plant if the conditions, including pilot testing and support from science, were right. “The best thing would be to have something in the UK… If you are producing batteries there then you will also produce vehicles there,” he said, suggesting a partnership with the Warwick Manufacturing Group in central England.
Nissan seeks Brexit compensation deal before making UK investment: The Telegraph
Japanese car giant Nissan has threatened to rule out fresh investment in its Sunderland factory unless the British government promises to reimburse firms for the hit they could take from Brexit.
Boss Carlos Ghosn said that auto manufacturers should receive compensation from the British Government if the UK’s decision to leave the European Union results in the imposition of tariffs on UK-made cars that are exported into the EU. Nissan is expected to choose in a matter of months where it will produce the latest model of its Qashqai vehicle. Its Sunderland site is Britain’s largest car factory and would be boosted by extra investment if the company decides to make the next Qashqai there.
However, Mr. Ghosn, who was speaking at the Paris motor show, suggested future UK investment by Nissan was conditional on the company securing guarantees on compensation. “If I need to make an investment in the next few months and I can’t wait until the end of Brexit, then I have to make a deal with the UK government,” he said.
He continued: “You can have commitments of compensation in case you have something negative. “If there are tax barriers being established on cars, you have to have a commitment for carmakers who export to Europe that there is some kind of compensation.”
