A recent vote made by the general population of the United Kingdom made headlines when it revealed that the majority of the public wanted Britain to leave the European Union. Since the vote results were released, worry has spread through financial and business circles around the world.
Perhaps the most worried industry leaders hail from the auto industry, where auto moguls like Toyota, General Motors and Britain’s own Jaguar Land Rover all find themselves in uncomfortable positions wondering where car sales are headed.
According to Joe Eberhardt, CEO of Jaguar Land Rover’s North American operations, as a result of the vote “All hell will break loose.”
“First of all,” he explained, “it will have a short-term impact on the currency. My bigger concern is long term. Right away all the exporting companies in the U.K. will be facing tariffs because they are not part of the negotiated E.U. Trade agreement. It would not be good for us.”
Industry analysts have been calling the results of Brexit “the big unknown,” and automakers especially are being forced to reconsider future trade and investment opportunities. Many are worried about the possibility that the Brexit vote may trigger other movements out of the E.U. that could further complicate what was once a fairly simple and easily facilitated trading process.
Many automakers were cautiously neutral ahead of the vote, but automakers Toyota and Nissan both were straight-forward in their warnings that the UK’s decision to exist the EU could cause a fair amount of turmoil, especially since trade and labor deals would have to be renegotiated and production plans would need to be adjusted accordingly.
“The immediate aftermath of the leave vote is set to see a sell-off of UK financial assets and a sharp depreciation in sterling,” predicted LMC in an analysis of the Brexit vote. “If a weaker currency persists, this might provide some support to U.K. exporters during the negotiation period, but uncertainty over the future of the UK’s relationship with the EU will weigh on business and consumer sentiment and depress UK growth.”
LMC continued on to explain that the Brexit vote will continue to have an impact on Europe in its entirety, including its auto industry. Considering almost 90% of the cars sold in the UK are imported and 80% of them are imported from the same continent. EU economic leader Germany could see exports to Britain fall dramatically, perhaps by around 130,000 vehicles annually. LMC expects Britain’s car market to fall by 410,000 units in 2018 as well.
This is bad news on a continent where the auto industry is just beginning to turn around after the major downfall that came as a result of 2009’s economic recession, the effects of which lasted for decades.
Ford Motor Company, which once possessed an enormous production base in Britain for two decades now, has said that its first goal in light of Brexit is to “maintain a stable trading environment so that we can continue building a strong and sustainably profitable business in the UK and Europe.”
According to the American based auto maker, it will now take “whatever action is needed to ensure that our European business remains competitive.”