Following Britain’s vote to leave the European Union, sales of both Japanese automakers will likely face some tough times ahead, according to an UK-based consultancy firm.
PA Consulting Group said that several automakers with UK operations would face an uncertain future because of the Leave vote. Furthermore, if the talks between the UK and EU over Brexit are not going to bring some tax relief for the companies, some UK factories could close because they would become uncompetitive. And plants run by Honda and Toyota are the most at risk of closure, according to the research. As they account for approximately 20 percent of the vehicles made in the UK, they are also dependable on exports to Europe and have relatively low margins and profitability.
Moreover, the consultancy firm cautions that the British automotive sector is in danger of losing massive investments, as the ambiguity of the upcoming transition period will likely prompt some overseas carmakers to place their investment in model upgrades elsewhere in the world. UK is sending over its boarders over 1.2 million cars each year, with over half going into the EU markets, but the research suggests that demand and sales could soon fall by 5 to 10 percent.
“The current lack of certainty about tariffs places a question mark over the future of a significant number of UK plants and jobs,” Tim Lawrence, head of manufacturing at PA Consulting Group, said. “As the supply chain investment tends to move with Original Equipment Manufacturers’ volumes, the impact on UK jobs and the economy will be felt beyond the automotive industry.”
Toyota already warned it would probably have to cut costs or make its cars more expensive to cope with the Brexit, thus affecting its sales, as Britain leaving the block would translate into levies of as much as 10 percent on the cars it builds in the country.