Pessimism has rarely done people any good. Yet I would not blame you if you think the whole world is one giant dumpster fire at the moment. With so many environmental and political issues all over it, one can easily come to such a conclusion. Sadly, it seems like the car industry will take a hit as well.
We need to have a serious talk about one such conundrum – Brexit. The topic has been a hot issue not just in Europe but all over the globe. It has so many intricacies that you can never know which areas may be affected. But with auto manufacturing being quite the big thing worldwide it is bound to suffer in some shape or form.
Today, we will explore what an economic disaster can do to our favorite industry. We will see how the UK can serve as an excellent example of why nowadays such issues cannot be contained within a country. They have ramifications on a global scale. Still, as it is with most things, there are two sides to the story!
The Brexit issue is a mess – here is why
Here in America, we have the luxury of not having to pay attention to the world. Of course, most of us have heard a thing or two about Brexit. That being said, we do not really understand what the fuss is all about. Allow me to shed some light.
People have compared the issue to a state wanting to break off the US. Yet this description fails to a significant degree. You see, the European Union is not exactly “The United States of Europe”. In fact, the UK has never really been “all-in” with the whole idea of unification. In other words, it has always kept one foot outside the EU. And now they want fully out. Or do they? Depending on who you ask, there are several different answers. And here lies the whole problem.
Not only are we, Americans, not aware of what Brexit means, but most Europeans (and Brits) have no idea either. When there is such confusion, business suffers. For example, since 2016 a lot of companies have removed their headquarters from London (and went to Ireland). However, it is one thing to transfer an office and completely another to mend an industry.
It has also been unveiled recently that the UK automotive industry may be bound to crash. Although Brexit is not entirely to blame, it was the problem that started it all. Honda has already closed a plant, and who knows what else may happen. Hence the question: if Brexit has effects on a global scale, will the UK auto industry crash affect us here in America, too?
What the UK car industry issues mean for the US
We can now get to the meat of the subject. No matter how big of a deal Brexit is for the British, first, we have to consider ourselves. Of course, we can have empathy for the people in Britain anyway. Yet if their car industry issues affect us greatly, the problem gains a much greater aura of urgency. So here we go!
For starters, Nissan, Jaguar Land Rover, Toyota, and Honda have all expressed concerns about the situation. They believe that if the proper trade deal is not established before Brexit, their UK facilities will see a lot of issues. As I have mentioned, the façade is already starting to crack. As it goes, jobs will be lost, the output will decrease, and the companies will not be able to scout for talent from abroad.
All this only adds fuel to the already raging fire. The automotive industry in Britain has been taking hits since the announcement of Brexit two years ago. If this goes on more plants will likely shut down. But OK – this all sounds harsh, yet I have not said a single thing about it affecting the States. Well, it will…
- Firstly, closing a plant is expensive. Companies have emergency cushions to deal with such things, but on a large scale, this may still affect car prices worldwide. Considering the market shares that Toyota, Honda, and Nissan have, this may indeed be a cause for concern.
- Secondly, we have to mention that the UK is a huge exporter of premium vehicles. Marques such as McLaren, Aston Martin, Bentley, and Rolls-Royce are UK staples. If UK trade deals go up in flames, enthusiasts are going to have a problem.
- Thirdly, the supply chains will suffer greatly. That means delays, tariffs, more paperwork, and who knows what else. It all boils down to money loss. You can easily guess that someone has to pay the price.
Naturally, I would not blame you if you see these things as pointing to an obvious disaster. Still, you can relax a little bit. So far these are only speculations. See, there is another point, which we have not taken into account. It may just be that not everything will be doom and gloom.
The other side – perhaps not everything is so serious
Obviously, we live in an age where technology dictates everything. It is kind of foolish to think that a single country can disrupt the entire course of the industry in the long term. What is a business if not adaptable? We should not forget that sometimes the industries themselves cry wolf in hopes of clinging to the last penny. So it will do us good to approach the subject with critical eyes.
Some automotive experts claim that even the worst Brexit outcome will have no ramifications in the long run. That is because Britain would be forced to adhere to the terms of the World Trade Organization (WTO). And you know what? Even now 50% of Britain’s automotive trade goes through the WTO. The infrastructure and paperwork seem to be mostly in place. Will revenue suffer for a while? Perhaps. Yet how much – no one can say yet.
Of course, there will be new contracts and agreements. The US would have to strike different deals with the UK. Will these affect the average US consumer though? Honestly, I do not think so. Sure, some very high-end cars are UK-dependent, but most of us are not driving McLarens. Actually, do you have any idea which car companies come from the UK and actually depend on it? You would be surprised…
The best-known UK car marques – who owns them?
So far the British auto industry issue has been discussed as this enormous worldwide problem. Of course, as I have pointed out, there are two ways to look at it. It is either a disaster or not that big of a deal for most people. Yet I believe we should put this in more concrete terms. Namely by looking at the most important British car brands.
I have to preface this by saying that it is not worth it to look at volume manufacturers. They have plants all over the world, so their logistics are much more adaptable. It will be interesting to take a look at the UK luxury staples. Because it turns out that many of them may not be so “British” after all…
- Aston Martin – Because you want to feel like James Bond
This car marque is one of the UK icons and has long been associated with Agent 007. While it operates from the UK, it is actually not a British company (even though it used to be). Now it belongs partly to Ford (USA) and two other companies (from Kuwait and Italy respectively). It goes without saying that the brand cannot just cut its British ties. There is a significant chance that Brexit will cause some issues for it.
- Jaguar, Land Rover and Range Rover – British in name only
I have lumped the three marques together because they belong to one company – Tata (India). They used to be Ford subsidiaries, but that is no longer the case. Since transferring ownership, Tata has made great efforts to cut the brands’ British dependence. So if I have to guess, Brexit may not actually be such an issue for them after all.
- McLaren – The British supercar manufacturer
Truth be told, McLaren Automotive may as well be the British company to suffer the most. The reason for that? It is the only one that still remains British to this day. And it operates strictly from the UK. Yet they serve a worldwide clientele, which is very important, considering how small the UK market actually is. So if you have been planning to get a McLaren, you may not want to wait much longer.
- Bentley – The luxury car all big boys want
As one of the staple luxury UK brands, Bentley has received a lot of praise throughout the years. Interestingly enough, it is not UK-owned either. In fact, it is a subsidiary of VW. There are now Bentley assembly plants in mainland Europe as well. Even though production is mainly in the UK, it is not far-fetched that VW may shifts things a bit. Especially if things get rougher.
- Rolls-Royce – Because who does not want to be a king
Fun fact – the true “RR” successor is not the current Rolls-Royce company, but rather Bentley (mentioned above). Modern-day Rolls-Royce cars are such in name only, and the company is a BMW subsidiary. However, its production still remains strictly on the UK side and has deep British ties. I can imagine that Brexit will not treat them kindly.
There are other UK brands too, but you can see the trend – most of them are not really British anymore. And from the ones that are most likely to suffer, none are “mass market”. Will that matter though?
What’s your take on the UK car industry crash?
Apparently, things are not that clear. I would rather refrain from commenting on Brexit’s political implications. However, when it comes to the auto industry, I am not really that worried. Do not get me wrong though – I do believe Britain will suffer. Yet that seems much more likely to be an internal problem. And we cannot really do much about that, can we?
But what do you think? Am I missing something? Perhaps there is a piece of the puzzle that I just cannot seem to place correctly. Let me know if the whole story has a rather dark twist, which I have failed to point out!
