Brexit Shakes Auto-Manufacturers Loose
For most people around the world, Brexit just means Britain separating out of European Union. But the truth is, Britain’s decision of separating from the union has sent jitters through all the countries across the world.
Great Britain acts as a gateway to the Europe and Brexit literally means closing of doors to the Europe via Britain. Britain’s favorable climate and a common language made it a commercial hotspot for manufacturers outside Europe but now all that is probably coming to an end.
Britain’s decision to get out of the EU has rattled the industry including the automobile industry. Britain currently exports 1.38 million units and analysts predict that the number will further drop down to 1.25 million by the end of 2019 and will also see some manufacturers moving out of Britain to find a new place for manufacturing.
Moreover, the automakers headquartered in the country will be the biggest losers since they’ll be levied with extra 10% of taxation while importing and exporting cars and car parts. This will definitely lead to reduction of production and also see a drastic price hike of cars.
One such company that will face big problems is Aston Martin. Aston Martin gets most of its stuff from the Europe and with the gates being shut now, Aston might just get into trouble.
For example, the 2017 Aston Martin Rapide S, the sports luxury grand tourer gets its 6 litre V12 unit from AMG, the performance wing of Mercedes Benz, straight from Germany. The Rapide also shares major bits of its interiors from Mercedes Benz models which too comes from Germany. Moreover, there is a lot of technology sharing between these two brands that are based in England and Germany.
But Brexit means that the understanding has to be revised and rewritten which as a result will see excessive price hike in probably all the Aston Martin models.
Another company that’ll suffer from Brexit is the Indian automaker Tata Motors which owns the UK headquartered Jaguar and Land Rover. Tata and JLR formerly enjoyed 10% price advantage in form of savings in import duty into the EU. On top of that about 40% of JLR components come from Europe plus Europe accounts to 25% of global market to JLR.
Experts predict that JLR will be incurring losses upto $1 billion by 2020 courtesy of the export tariff that will be implemented very soon. Japanese automaker Suzuki too will face the heat of Brexit since it exports half of its produced cars to the Britain and then ship it to other parts of Europe. Brexit has created fluctuation in the currency which has further resulted in the increase in operational costs.
According to an estimation by the Wall Street Journal, BMW could face steep fall in sales as it sells almost 11% percent of their vehicles in the UK. Depreciation in the pound value too has forced BMW to increase the prices of its vehicles and its subsidiaries Mini and Rolls Royce as well.
Not just auto-makers but also automotive part manufacturers are also in great burden of Britains exit from EU. Bharat Forge and Motherson Sumi are currently largest auto component suppliers in the UK.
Bharat Forge contributes to almost 40% share of the current forged components supplier market while Motherson Sumi’s Netherlands based subsidiary covers almost 80% of the total market.
But all is still not lost. If worked out well, a stable relationship between the EU and the UK can still sustain. There are still 3 years fot the actual divorce to take place and companies across the globe are still hopeful about balanced trade ties and fair tax tariffs.
With all that being said, we can only hope for things to improve and business to stabilise in the coming years for a market that already very volatile.
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