Brexit: will it affect car companies?

The British pound is dropping, investors are wary and the overall mood concerning Britain's exit from the European Union (EU) is gloomy.

Will this affect the automotive industry in the UK? Without a doubt. And by extension it could have long-term ramifications for Australia and international car markets.

In Australia, for instance, slightly more than 32,000 UK-built new cars were imported here in 2015. That's around 2.8 per cent of the total 1.15 million sold here that year.

In total the UK manufactured 1.58 million cars in 2015 and the most immediate issue for the country is that a whopping 57.5 per cent of those vehicles were sold in Europe. If Europe chooses to impose tariffs or tolls on cars built in the UK as some financial analysts are predicting, it'll increase the cost of British-built cars.

This could potentially reduce demand, the knock-on effect of which will hurt the UK automotive industry in many varied ways.

The most senior executive at German manufacturer Mercedes-Benz, Daimler CEO Dr Dieter Zetsche, was pessimistic about Britain's exit from the European Union.

"This is not a good day for Europe – and in my view, certainly not for the UK. Geographically, the country may be an island; politically and economically, it is not," he stated.

"It is now even more essential that Europe does not continue to drift further apart."

Talking to motoring.com.au about the changes, McLaren Automotive's Global Corporate Comms Manager, Duncan Forrester, said there would be positives and negatives to Brexit.

"The biggest challenge of Brexit – and you'll hear this from everyone – is the uncertainty," Forrester told motoring.com.au in the UK.

It's this state of flux, this unpredictability that could take years to resolve, that is creating market instability. As such, the sooner everyone knows where they stand, the better, says Forrester.

"We have already started lobbying policy makers and frankly anyone who listens to us to actually make sure this [transition] process is as quick as it can be."

As to the question of tariffs, McLaren's global communications chief was unconcerned.

"I am certain we will end up in an environment where trade is not a problem. I certainly don't believe we'll end up with any tariffs or things like that.

"We are the world's fifth-largest economy. We are the second-largest economy in Europe. I can't see a situation where they are not going to want to sell their cars to us, and therefore vice versa."

There's a flip-side to the Brexit market reaction too.

The value of the UK currency, the pound or sterling, has been dropping against the Euro, but it's unlikely to affect the price of UK imported cars in Australia any time soon.

With the British exit from the EU not expected to happen short of two years from now, any changes to tariffs and exchange rates are likely to have more effect on parallel imports from Britain to Australia, with the federal government committed to freeing up vehicle importation rules. Careful timing, with a weather eye on exchange rates, could help local buyers secure new/old stock or demonstrators at a significantly lower rate from a UK dealer than a new car via the factory-appointed distributor in Australia.

If anything, it could have positive effects for UK car makers, supplying models such as the Jaguar XE, Nissan Juke, Range Rover Evoque, MINI Cooper and McLaren 650S.

"One doesn't necessarily want to be seen to be benefitting from others' discomfort, but actually if the pound stays weak for a short while that helps us," said the McLaren spokesman.

Ultimately there's still a wide array of issues to be resolved, many of which are still unknown. After all, no country has ever left the European Union before. Whether tariffs are placed on UK products or not, it's unlikely things will go back to 'normal' for businesses in the UK.

"No, I don't think it'll be business as usual," said Forrester, "but whatever happens I think there'll be evolutionary not revolutionary [changes].

"I don't expect us to be standing here together at the next Goodwood Festival of Speed thinking, "What happened? The world as we knew it has changed and suddenly the sky is green!"

"Armageddon hasn't happened," he said.

Well, not yet.

Car companies building cars in the UK today:
Aston Martin
Mini (BMW Group)
Rolls-Royce (BMW Group)
Ford
Vauxhall (GM)
Honda
Jaguar
Land Rover
Lotus
Nissan
McLaren
Morgan
Peugeot
Toyota
Bentley (VW Group)