Brexit and the Automotive Industry

by Admin on June 27, 2016


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On June 23rd, 2016, the United Kingdom held a referendum on the country’s continued membership to the European Union (EU). The British people voted in favour of the British exit (Brexit), with 51.9% in favour of an exit and 48.1% in favour of remaining. This decision is projected to make huge waves on the economy and various industries, and the automobile industry is no exception. Shares of various suppliers and dealership groups with ties to the U.K. took a hit immediately following the results of the referendum. Share prices on Fiat Chrysler Automobiles, which has its headquarters in London, dropped on the New York Stock Exchange from $7.19 to $6.31 on the day after the referendum results.

Uncertainty following the decision is causing automakers to drop their sales forecasts for the U.K. region because it is difficult to predict the effects that Brexit will have on importing and exporting goods. Jaguar Land Rover, which is based in England’s West Midlands, claimed prior to the vote that if the UK voted in favour of Brexit, it could sap as much as $1.38 million US dollars from its revenue by the end of the decade. Analyst firm Evercore ISI cut the overall sales forecast for automobile sales by 14 percent through 2017, and said that Brexit could impact overall automaker revenues by over $8.9 billion.

This decision comes at an unfortunate time for the U.K. auto market. The market boomed recently, hitting a record high of 2.6 million vehicles sold in 2015, of which 90 percent were imported mainly from Europe. In addition, the U.K. built 1.6 million vehicles and exported 80 percent of them, mainly to other parts of Europe. These transactions were tax free before Brexit as part of the EU trade agreements, but now they are in jeopardy since tariffs may be implemented that will slow down both importing and exporting of vehicles from the U.K.

The good news for automakers is that most of this is just speculation at this point. No one is really sure of what Brexit means for the global economy, and we may not know for a couple of years. BMW, which owns six British companies including Rolls-Royce, has said that it’s just too soon to estimate what the full effect of Brexit will have on their operations. Hopefully for automakers, specifically those with bases in the U.K., things will settle down within a month or two and business will continue as usual.

Manvir Sangha
SEO/PPC Analyst

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