Helping you prosper

Brexit: the almost forgotten factor that could significantly impact the automotive sector…

Many automotive businesses have enjoyed a very strong period since the lockdown relaxation, with some forecasting record performances, however it cannot be ignored that come 1 January 2021 the trading relationship between the UK and the European Union may look very different.

There has been talk of potential price increases due to tariffs of up to 10%, if the free trade agreement is not kept in place, which could have a significant impact across the industry. Not only would it make imported new vehicles more expensive for those importing from within the EU if no free trade agreement was in place, but the Korean and Japanese manufacturers may well gain significant market share due to the fact they would fall outside of any EU agreement.

This could be a real game changer and have a significant impact not only on the competitiveness of vehicle pricing but also the longer term market share those manufacturers gain. The other positive that could come from increased tariffs is the impact on the used car market – clearly a short term benefit would be the potential of used car prices rising, due to the sudden increased cost of a new vehicle. It would also mean in the short term that the monthly payments on a new vs. used could have a much larger variation, compared with some of the deals available today where a new is the same value or can be cheaper sometimes due to manufacturer incentives.

My personal view is that if a free trade deal can be agreed, this has to be in the interests of the industry, as well as it likely having a very positive impact on the exchange rate. Currently all of the uncertainty, coupled with the COVID-19 pandemic really hasn’t helped settle anything down. The coming weeks will be very interesting as the UK and EU lock horns in an attempt to thrash out a deal… Dealers and suppliers should all be closely monitoring the situation so you are prepared for whatever the outcome may be – easier said than done with the current challenges faced by everyone heading into Q4. Let’s hope the pent up demand continues and profitability remains.

If you’d like further information on the impact of Brexit on the automotive industry, please get in touch with David Kendrick or your usual UHY adviser.