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How will Brexit affect the automotive industry?

Automotive industry

Now that the UK has voted to leave the EU in the recent referendum, a key question car enthusiasts are asking is, how will Brexit affect the automotive industry? This is a tricky question with a range of contrasting and conflicting points of view. There are many groups to take into consideration, from manufactures to first time car buyers. We will cover a variety of questions that have arisen over the last fortnight following the nation’s decision to leave the European Union.

The Automotive market

With the UK exporting 58% of its cars to the EU, there’s no wonder people are worried about what Brexit will mean for the automotive market in Britain. Last year 1.59 million cars were produced in the UK and the industry employs over 800,000 people. It contributed £15bn to the economy last year. Can the market continue to grow at the same rate outside the single market? Any answers to this question are based on predictions and guess work because no-one can say for sure how leaving the EU will affect the industry. It’s all dependent on negotiations with the EU, whether we can achieve tariff-free access to the market once we leave, being able to recruit and retain skilled workers from within the EU (especially engineers) and if we are able to remain competitive in the market place.

Toyota, Nissan, Ford and BMW all came out before the EU referendum in support of a Remain vote. The immediate effect of the result has yet to be felt by them but the change could impact their future decisions to invest. At the moment, Britain’s market represents a degree of uncertainty and uncertainty is not good for business. There are arguments that leaving the EU could result in reduced ‘red tape’ for trading and the lower sterling value may become more appealing but there isn’t clear evidence to support this at this point in time.

Buying cars

The RAC have said there is little evidence that a Brexit will make it more expensive to buy. Their argument is that we are an influential hub in industry and manufacturers will want to stay competitive. In the long-term this is dependent on the negotiations of trade tariffs with the EU. If we don’t get a good deal, it could make cars abroad cheaper but we can’t be sure. However, now might be the best time to buy a new motor as some are saying prices will rise in the short-term to compensate for the devalued sterling. Also, cars purchased on finance won’t be affected immediately – we will continue to follow EU regulations for some time yet.

Petrol & diesel prices

The AA are predicting a steep increase in petrol prices in what is already one of the most expensive petrol markets in the EU. They say there could be a rise of as much as 18.7p per litre. This is based on the estimations of the sterling’s value dropping by 20% after a Brexit. However, the RAC argue that there wouldn’t be a big increase in petrol prices, instead saying that oil prices (which are traded in dollars) are going to have a greater influence at the moment. Again, there is a long list of factors which feed into this topic so it’s hard to say for definite how big the increase will be. But I think we can say that there will be an increase ahead.

Costs for driving in the EU

If you have a road trip planned in Europe this summer – and why not when there are so many great options (see our previous post on the Best European Road Trips for ideas)– then you won’t have to worry about paying extra to drive there. Experts say there will be little to no change to regulations for driving in Europe in the near future. The same goes for breakdown cover abroad. Britain will remain outside of Europe’s passport-free Schengen area (as it was before the referendum) and the same border checks will continue. Non-EU members are limited to 90 days of driving without a visa. They could apply to Britain in the future but it won’t take effect any time soon.

If you are worrying about petrol costs in Europe, then stop. Although the euro is currently doing well against the pound, on average petrol prices has remained consistenly lower in Europe at €1.16 per litre whereas in the UK the average price is €1.32 per litre.

There are likely to be tighter customs checks, including alcohol and cigarette restrictions, which will come into place as a result of leaving the EU but we could also see the return of duty-free shopping at ports and ferries. In general though, the EU referendum results isn’t expected to have a huge impact on driving abroad.

Our conclusion

Overall, it’s hard to know for sure the exact impact that Brexit will have on the automotive industry. Most predictions come down to negotiations on access to the single market and whether we can agree upon tariffs that will benefit the UK. The decrease in the value of the sterling also plays a big part in the debate and will undoubtedly impact the industry. This could go either way and we will have to be patient and see how things turn out. The good news is that for the short-term markets continue to do well and there have been no withdrawals from mainstream or premium manufacturers.

Get involved in the debate and share your opinion in the comments section below or on Twitter (@WeWantAnyCar).



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1 thought on “How will Brexit affect the automotive industry?”

  1. Richard Nkwocha says:

    Take Honda cars produced in the UK for example. Parts come from all over Asia ,the US and Japan whose currencies have appreciated to the pound.In which case Honda will have to find extra pound sterling to compensate.This cost will be passed to the consumers in the EU,who will find a lower amount of Euro to pay for the finished car.But what will usually happen is that before now the fund managers would have used derivatives to hedge against the expected foreign exchange fluctuation .It is in the interest of the EU not to go into trade war with the UK ,because it will be mutually assured destruction.The new equilibrium as a result of the various forces at play may result in a marginal price change for cars produced in the UK.

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