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© PA Knowledge Limited 2016
BREXIT: THE IMPACT ON AUTOMOTIVE MANUFACTURING IN THE UK
July 2016
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© PA Knowledge Limited 2016
Source: PA research
• The UK exports over 1.2 million cars per year – with over half going to the
European Union (EU)
• Following the Brexit vote, we see high levels of uncertainty driven by the
current political and economic environment. If this continues, car sales in the
UK could fall by 5-10%
• Investment decisions by original equipment manufacturers (OEMs) based in
the UK could be delayed due to this uncertainty
• This uncertainty comes at a time when technology is changing fast, eg
electric vehicles and autonomous vehicles, so overseas investment in the UK
on these new technologies may be impacted
• We see three categories the UK OEMs fall into – the leavers, the question
marks and the stayers
• Japanese implant investments rely heavily on exports to Europe and have
relatively low margins and profitability. They therefore face the biggest
risks and are most likely to leave. These companies will have to make key
investment decisions in the next two to three years when trade
arrangements for Brexit may still be unclear
• Mini and Vauxhall are question marks because they have a stronger
heritage (especially Mini) but they have EU options
• JLR is a stayer because the company has options due to its global
footprint. It has an advantage around a higher margin, but it is likely there
will be more regional and local production, and low to no growth in UK
production. There is also a chance it will increase its global footprint
• We don’t see an immediate reversal of investment decisions already made,
but decisions taken in next 12 months will impact investments that will be
made in 2018-20
• The supply chain investment will tend to move with OEM volumes – with a
bigger impact on jobs and the economy. There is also a chance of more
localisation if imports are more expensive.
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© PA Knowledge Limited 2016
Source: PA research
During the last six years, there has been significant growth in the UK automotive industry. In
2015, production increased by 5.2%, employment in the sector rose by 3.15% and turnover was
boosted by 7.3% to £71.6 billion. Last year, almost one in every five cars registered in the EU
was produced in the UK. Most of the production is exported, where 50% is destined for the EU
market. At the same time, the domestic market is heavily reliant on imports.
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© PA Knowledge Limited 2016
Source: PA research
• The UK remains in the EU and maintains free movement of goods and people
• The UK remains in the European Economic Area with free movement of goods and people
largely retained. The UK has EU regulations in place, but without UK influence over them
(ie Norway)
• The UK establishes bi-lateral trade agreements with key trading partners
• The UK establishes trade agreements based on World Trade Organization rules, with 10%
potential tariffs.
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© PA Knowledge Limited 2016
Source: PA research
FACTORY LOCATION
CHOICES LIKELY TO HAVE
BEEN MADE
DECISIONS YET TO BE MADE
2017 2018 2019 2020 2021 2022 2023 2024
HONDA CIVIC/
CR-V CIVIC
VAUXHALL ASTRA MPV
MINI COUNTRY
MAN CLUBMAN MINI
TOYOTA AURIS/
AVENSIS AURIS
NISSAN LEAF/
JUKE NOTE QASHQAI
INFINITY
Q30
JAGUAR XJ F-TYPE XF/XE F-PACE XJ/XJR
LAND
ROVER EVOQUE
NEW
DEFENDER
RANGE
ROVER
SPORT
DISCOVERY
SPORT
EVOQUE/
DISCOVERY
TRADING ARRANGEMENTS
Several UK car factories face an uncertain future following Britain’s vote to leave the EU. A
period of uncertainty during talks between the UK and the EU over Brexit may prompt some
overseas carmakers with UK plants to invest on model upgrades and new car launches
elsewhere in the world.
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© PA Knowledge Limited 2016
Source: PA research
• The leavers – plants run by Honda and Toyota are most at risk of closure after Brexit. They
are highly reliant on exports to Europe and have relatively low margins and profitability
• The question marks – Mini, Nissan and Vauxhall are unknowns. Although they have a strong
British heritage (especially Mini) they have EU options
• The stayers – Aston Martin, Bentley and Jaguar Land Rover are stayers. Although they are
highly dependent on the EU and overseas markets, they have a British-centric operation and
brand.
Low High
Groups OEM Share of new
models*
Share of
model
refreshers*
Export share
of UK production Comments
The
leavers
Sustaining current investment
by choosing to exit
The
question marks
Leveraging a diversified
footprint to react to future
developments
Taking advantage of alliances
and external market
conditions
The stayers
Competitiveness is at risk due to a
high volume of exports to Europe in
light of 10% tariffs and new model
portfolio
Exploitation of current investment, eg
Honda Civic, followed by slow ramp-
down scenario
Tier support by Nedschroef and Magna to allow
for a quick ramp-up of production abroad
Continued investment in globalisation
Costly investment of new model launches to
be considered (Land Rover)
Significant commitment to UK and premium price
Highest local registration volume to be
covered by local UK production
A high degree of sales in dollars benefits from
the depreciation of the pound
Maintains British heritage
Land Rover is high,
Jaguar is low
Aston Martin only Aston Martin only
*From 2017 *From 2017
Significant investment in the Sunderland plant
in 2015 supports continuation in the UK
Flexibility supported by ties with Renault
Toyota
Honda
Mini
Nissan
Vauxhall
Jaguar Land
Rover
Aston Martin Bentley
>70%
>60%
>90%
>70%
>80%
>70%
>70%
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© PA Knowledge Limited 2016
Source: PA research
Cost of production
may increase as 64%
of components are
imported (unless UK
suppliers provide
higher autonomy)
British OEMs may be
isolated from a potentially
closed EU ‘club’
Lower domestic
demand, along with
more expensive
exports due to tariffs,
may slow down the
car turnover
New technologies in the connected and
autonomous car may be ignored due to
investment re-prioritisation and the lack
of EU research funds
UK may be unable to
shape the future
Investment from new players and
suppliers may become unattractive
due to the new trade agreements
EU research funding
and foreign investment
may become
unavailable
UK may lose its voice
during the shaping of
the regulatory
framework in the EU
Domestic policy may
diverge from the EU
regulatory framework
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© PA Knowledge Limited 2016
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