Britain has opted out of the EU, does this mean the major auto players opt of the United Kingdom?
Nearly a week ago Britain voted to opt out of the European Union through a historic referendum which not only took the world by surprise but also the pundits. This outcome was least expected and is predicted to cause a burning hole for the automobile manufacturers. After Prime Minister, David Cameron confirming that there would not be another vote, analysts are sensing major structural changes in operations of the major auto players.
With UK holding the major chunk of sales and profits for GM and Ford in the European region, Ford is likely to be affected more because of Ford imports its vehicles. On the other hand, GM appears to be on the brighter side of the coin as they ride on the benefit of the two local manufacturing facilities they possess. The mighty beating the pound has taken after the Brexit has worked to their favor. Recently, General Motors released a statement saying they have an employee base of 4,500 and 11,000 indirectly through retailer networks in UK and that Brexit may hamper their European business on a whole.
Tata Motors, who have been doing well of late might see a slump in stocks as the company’s subsidiary, Jaguar Land Rover, Britain’s largest car manufacturer estimates its profits could reduce approximately by 1 billion pounds per year. However, on the other hand, M&M Group Chairman, Anand Mahindra tweeted: “Brexit is a Tsunami alert to the world that I believe is exaggerated. The world needs to take a tranquilizer.”
To put it in simple terms, Britain manufactured close to 1.5 million vehicles last year out of which 80% are exported. 58% of these exports are to other European countries. What this means is that right from the spare parts to the vehicles, tariffs and taxes will be imposed on the exports from UK by other European nations. The rate of these tariffs will only be known after the negotiations with the EU is completed. From a major auto players’ perspective, this could dilute profits to a great extent. Will they be on the lookout for catering to Europe through other countries in the continent which may lead to suspension of operations (Carxit) and layoffs in UK?