As long as the UK motor industry continues to look crestfallen, we shall have no chance…

30-Nov-2018

Three quarters of UK automotive businesses have stated that they fear the consequences of a ‘no-deal Brexit’, to a level that will threaten their future viability, according to a new member survey (responded to, by 182 members) announced by the Society of Motor Manufacturers and Traders (SMMT) at its recent 102nd annual dinner in London. The results seemed to highlight the critical need for a Brexit withdrawal deal and transition period to prevent the industry falling off the much-publicised ‘cliff-edge’ on March 29, when the UK leaves the EU formally. 

Although 74.1% of companies with UK operations that responded to the survey said that a ‘no-deal’ scenario would damage their businesses, with fewer than 9.0% foreseeing any positive impact most disingenuously, the simple fact is that somewhat more than the 7.69% stating that they ‘didn’t know’ would be closer to the truth. More than half stated that their business operations had already suffered, as a result of uncertainty about future trading arrangements, even though an air of inevitability exists on that score too. Almost a third said that they had postponed, or even cancelled, UK investment decisions because of Brexit, with one in five having already lost business as a direct consequence, although that only serves to highlight evidence of extreme myopia. 

More than half of firms said contingency plans were being executed, with 12.4% relocating UK operations overseas and the same proportion already reducing employee headcount. Many have also made alterations to logistics and shipping routes, investment in warehousing and stock, and adjustments to production schedules. While planning is crucial for any business, to plan for the worst possible outcome is negative and draws into the question the managements’ viability in the first place.

SMMT members also outlined the further and long-term damage that a ‘no-deal’ Brexit could do to their businesses. No less than 68.5% of respondents said that their profitability would be affected negatively, with 53.9% concerned about their abilities to secure new overseas business, and a similar number worried about maintaining investment in their UK operations. A further 50% said a ‘no-deal’ scenario would undermine their abilities to maintain their existing workforces. Considering that nobody actually knows what the outcome will be, partly because none of us has been informed, highlights the presumptive nature of surveys compiled in an atmosphere of uncertainty.

Of course, Carlos Ghosn, the recently-deposed boss of the Nissan-Renault-Mitsubishi alliance, may know more, after all, he was privy to some form of ‘agreement’ with PM May, within hours of the referendum result being announced more than two years ago. Although, his recent incarceration by Japanese authorities, for misappropriating funds and other ‘financial irregularities’, which led to his removal as CEO from both Nissan and Mitsubishi boards (although, strangely, not Renault, at the time of writing), may ensure that nobody discovers the truth!

Without doubt, the automotive sector is one of the UK’s most valuable assets, as it employs 856,000 people and delivers £20.2bn to the economy. Since 2010, car production alone has risen by a third, with 1.67m cars leaving production lines in 2017 (80% bound for export, mostly to the EU). Over the same period, the number of jobs supported has risen by 120,000. This growth is said to have been dependent on free and frictionless trade, within the single market and customs union.

It is anticipated that a ‘no-deal Brexit’ would bring an immediate end to the seamless movement of goods, resulting in disruption at the border and delays, throwing ‘Just-in-Time’ manufacturing processes into chaos and undermining the competitiveness of the sector, which could, ultimately, put profitability and jobs at immense risk. Yet, this is entirely inward-looking, as we import from European countries and German brands predominate in our UK sales charts. The big question is, how it might affect those companies.

Mike Hawes, SMMT chief executive, told Business Money: “Frictionless trade as part of the EU single market and customs union has driven the success of the UK automotive industry, so the fact we are leaving is already painful and already causing damage. Leaving without a deal would be catastrophic; plants will close; jobs will be lost. Leaving is not what we wanted but we recognise that the withdrawal agreement has been hard-fought and, crucially, delivers a transition period, which steps us back from the cliff-edge. We need a deal now and we need an ambitious deal for the future that guarantees frictionless trade with our most important market; nothing else will do and we urge all parties to remember what’s at stake.”

According to Tony Walker CBE DL, SMMT president and managing director, Toyota Motor Europe: “No deal is not an option. In the short term, crashing out of the EU would have immediate and devastating impacts, with border chaos disrupting our business. This could last for weeks, even months. It is unimaginable that we could implement full WTO import and export procedures overnight. For the longer term, a ‘no-deal’ Brexit would harm our competitiveness, undermine sales and cost jobs. We need the certainty of a deal, not more uncertainty, and we need the smooth transition period based on current trading conditions. It is vital that we have free and frictionless trade with common technical standards. Without these, we risk losing all that we have achieved in building a world-class automotive sector.”

Having tried unsuccessfully to obtain statements that might contemplate the obverse side of manufacturing coin, bearing in mind that, apart from a few small volume players, the UK is no longer a major manufacturing base in the automotive scene, a mix of political and financial contacts appeared to be uncharacteristically ‘unavailable for comment’. Yet, even a source within Parliament concurred that, as we have been in a political union with the EU for the past 47 years, the future is not something that even the wisest of business forecasters can predict.

In conclusion, apart from being forced to wait, my prescription would state that a smile and a positive outlook will have more significant end results than scowling negativity. Mind you a ‘bad deal’ would, by definition, not be good either.


Motor Industry Snippets

Fleet bosses talking telematics

Ever since the light commercial aspects of fleet management have adopted in-car telematics (‘spy-in-the-cab’), the situation has been monitored by a number of car fleet operators. Wrapped-up in Duty of Care considerations, by forward thinking companies that seek to improve safety, productivity and well-being for their staff driving company vehicles, apart from some pertinent software alterations to cater for the broader operational aspects of a car versus a van, telematics applications could be the next best thing to apply to all business fleet operations. Companies like Ford and Verizon are working on developments.

Tax benefits of plug-in hybrids in serious question

A survey of PHEV users has highlighted a worrying trend. While the benefits of self-charging (on the move) are practical, it seems that the majority of drivers either cannot be bothered, or simply do not plug-in their vehicles to fully recharge the battery packs. Having gained ‘free’ access to congestion charge zones, let alone gaining from the lower taxable benefit, it has been revealed that their vehicles may be more polluting than an equivalent diesel-powered alternative and are certainly not achieving the proposed MPG figures. Naturally, the availability of plug-in sites is still not as wide, as it needs to be, but even those drivers with a domestic wallcharger are not plugging in. Perhaps it is time for the duty to be included within employee contracts.

Mazda relies on allure with new 3


When a car manufacturer wants to impress, it turns out a show car, or concept. Mazda, a carmaker renowned for stretching the boundaries of emotive acceptability, has unveiled an all-new Mazda3, one of the firm’s most popular models. Adopting a matured version of the Kodo design language, the overall design presents a simple, single outline, the subtlest of undulations and the closest of panel shut-lines to bring the styling to life, through shifting light and reflections that glide unhindered over the bodywork. While the diesel engine may be dropped from the UK line-up, its high-compression, supercharged petrol is tuned to achieve excellent MPG. The new model arrives in early-2019.

Hybrid values on the ‘up’

Automotive data expert HPI has listed the best petrol hybrid picks for buyers considering a used model. Registration volumes in the petrol hybrid sector have grown by 30.9% in the twelve months between Oct 2017 to Oct 2018 and account for 3.8% of all motoring registrations, according to recent SMMT vehicle data. At the top of the table is the Toyota Prius, which holds an excellent 69.4% of its value after two years and loses around £8,000 on average. The Lexus LC comes a close second, holding 68.4% of its value over the same period, with the Toyota C-HR retaining 67.2% of its average new price, suggesting that the originator of hybrid technology in the UK is also the preferred brand (Lexus being the luxury arm of Toyota). Higher residuals also suggest better lease and PCP rates.

20 best petrol hybrid depreciators at two years and 20,000 miles.

Model

Average New Price (£)

Average New Price
Retained (OCN) %

Average Depreciation (£)

TOYOTA PRIUS (2015--)

£26,071

69.4

-£7,984

LEXUS LC (2017--)

£81,283

68.4

-£25,650

TOYOTA C-HR (2016--)

£26,145

67.2

-£8,587

KIA NIRO (2016--)

£23,970

65.2

-£8,345

TOYOTA RAV 4 (2015--)

£34,780

64.8

-£12,230

LEXUS RX (2015--)

£55,339

64.7

-£19,530

SUZUKI IGNIS (2017--)

£14,314

64.6

-£5,064

LEXUS RC (2015--)

£41,563

64.3

-£14,850

HYUNDAI IONIQ (2016--)

£22,240

62.6

-£8,323

TOYOTA AURIS (2015--)

£25,115

62.5

-£9,423

LEXUS IS (2016--)

£37,339

61.2

-£14,583

SUZUKI SWIFT (2017--)

£15,314

59.9

-£6,152

TOYOTA YARIS (2017--)

£19,124

56.8

-£8,269

FORD MONDEO VIGNALE (2015--)

£31,820

55.5

-£14,170