How Brexit could affect OEMs

The result of the 23rd of June could affect car manufacturers based in the UK in a number of ways, according to industry experts.

How Brexit could affect OEMs

Partner at Eversheds Simon Jones, tells Motor Finance that Brexit could have an adverse effect on OEM’s investment in the market.

Jones explained: “It is generally expected that Brexit will have a negative impact on the auto industry – at least for the volume manufacturers. Much of the investment into the UK’s resurgent auto industry by global manufacturers is based on the UK’s open and free access to all European markets and to the UK being an active and influential member of the EU.”

Another impact cited by Jones is a softening of demand for new cars and commercial vehicles caused by a slow-down in economic activity.

Jones added that the profitability of OEMs could be affected from exchange rate volatility, he said: “Whilst is true that the UK’s exports will become cheaper, vehicle components are imported and will therefore become more expensive.”

Opportunities

NACFB board member Graham Hill said that Brexit can be an opportunity to increase the sale of cars, built in the UK, into other countries that UK-based manufacturers have struggled to sell into in the past once the country has negotiated a free trade agreement.

Hill explained: “This won’t allow us to start exporting cars to these non EU countries without a free trade agreement because we already do. But it means that tariffs will be removed making the cars exported from this country cheaper. China, India, US, Australia all present opportunities if we can get stuck into trade negotiations. The EU has made such a cod’s ear of its negotiations with non EU countries, mainly because each deal has to be ratified by all 28 (now 27) member states.”

“Anything that Europe wants to export to non EU countries with which the EU doesn’t have a free trade agreement and we have will want to manufacture their products in the UK. May not be such a bad deal after all albeit I feel we have a lot of pain to suffer before we actually get there,” he added.