UK Automotive Industry Faces Pre-Brexit Tumults

The automotive sector in UK is known for its world class attributes, employs millions of people and extensively supports the British economy. However, like all other sectors, UK automotive has registered dampening of demand and a substantial decline in production of late.

The recent figures suggest that in 2018, the sales for new cars were down by approximately 6.8% as compared to 2017, according to the Society of Motor Manufacturers and Traders (SMMT). A major justification for the deteriorating trend lies in the confusion around UK’s withdrawal from the European Union (EU) and falling consumer confidence, which is likely to worsen in 2019. The rising uncertainty regarding potential aftermath of Brexit seems to have undermined spontaneous investments. A no-deal case would considerably hamper exports, imports accompanied by rising tariffs given the sector’s complex and scattered supply chain across the world and EU.

Meanwhile, overseas demand remained healthy as Americans spent heftily on Rolls-Royce Motor Cars in the wake of large tax cuts by the government. The company reported its highest sales ever in five years in 2018. In addition, UK has pretty established markets in Japan, China and Canada as well. Yet, the demand from EU countries dominate the share.

While the hopes are heightened around EU sparing enough time for the economies to adjust to the transition until 2020, the trading might not be the same and industry is expected to suffer thereafter.

Lately, Jaguar Land Rover and Ford have announced plans to cut thousands of jobs, including at least 2,000 in the UK mainly driven by plummeting diesel sales in Europe and consumer demand in China. Jaguar is in a pretty rough patch in terms of falling sales in China and enforcing lay-offs to cut cost. Also, consumers are gradually moving towards petrol and alternative fuelled vehicles such as electrics or plug-in hybrids wherever viable, whose market share has relatively gone up year on year. Another prominent notion is that, the car production in UK slowed down as the new pollution test rules stringently came into action.

Going forward, as the UK and the EU take a final stance, the government has a lot to incorporate in its final policy and deal so that the automotive industry isn’t entirely devastated. There is a need for the authorities to provide a level playing field for all sectors to ensure continued trading and time to reorganise and strategize as per the new economic and political ecosystem. While suppliers, manufacturers and customers wait for the end result, the industry is set for a transformation in the year to come.

Irrespective of the circumstances, the companies need to prepare ahead of any abrupt changes and plan out their contingency plans to avoid extreme crisis and losses.

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