Brexit set to impact UK Porsche Sales

We’re now eleven days from the Brexit Referendum, when Britain will vote on whether it stays in the EU, or leaves. Most of the people I’ve spoken to have still not decided which way to vote. “The question is simple, but both sides are confusing,” said one friend. “I don’t think I’ll ever know which way is right.”

EU Referendum: The Split

The latest Independent poll shows the Leave side ahead, with 55% set to vote to leave the EU. More under-35s want to stay but are less likely to vote, while 60% of over-65s want to leave and are most likely to vote. Whichever side wins, a huge swathe of the UK population is set for disappointment and negative fallout is inevitable.

German Porsche production factory 1

Britain within the EU

Britain first applied to join the EU in 1963, but the application was blocked by France, which saw Britain as a nation in decline, due to its disintegrating empire and struggling economy. By the time of its eventual acceptance in 1973, inflation in Britain ran at 20% and trade unions had total command of UK production. By 1976, Britain had applied for a £2.3 billion IMF bailout (as much as £30 billion today). The UK’s national debt still runs at more than 70% of GDP.

Servicing the national debt obviously depends on national income. As the world’s fifth-largest economy by nominal GDP, the UK is a relatively high tax environment, with many stealth taxes bolstering high rates of income tax. It is the planet’s ninth-largest exporter but the fifth-largest importer. In April 2016, 47% of all UK imports came from the EU, but this number has been as high as 55% in the last 12 months. In April 2016, 48% of total UK exports went to the EU. This percentage is rarely less than 40%.

One car built every 16 seconds

Car manufacturing makes up a huge part of UK exports. A car is built every 16 seconds here in the UK, with 443,581 vehicles built in the first quarter of 2016. 329,653 of those cars were built for export.

Leave campaign leaders deny that the arrival of trade barriers between the UK and Europe would cause problems for UK manufacturers, arguing that Britain could replace its lost trade by increasing sales to the US, China and India. Incredible as this sounds, a majority of UK poll respondents say they will vote for this and more, including increased aggravation in trade and travel, a higher retail price for UK exports within the EU, and higher EU import prices for UK consumers. This includes cars produced in Europe.

German Porsche production factory 2

Higher cost of German cars post-Brexit

Twenty percent of all German-made cars are sold in the UK every year (820,000 cars/€18 billion in 2014) and many EU parts supply chains begin in the UK. German car manufacturers would inevitably be impacted by a UK vote to leave the EU. Brexit’s effect on exchange rates and any additional import tariffs would make German cars more expensive, and also raise the running costs of existing cars, with a rise in parts prices. The UK is also the fourth-biggest market for German engineering, with sales of €6.8 billion in 2014.

“A British exit would be a step backwards for German industry,” Ralph Weichers, chief economist of the German Toolmakers Association (VDMA) told the Financial Times. “Great Britain outside the EU would become less attractive as an industrial location.”

“Keeping Britain in the EU is more significant than keeping Greece in the Euro,” said Matthias Wissmann, president of Germany’s automotive industry association (VDA). “Britain would no longer be part of the single market. And questions of regulation would have to be negotiated, as we do now with Switzerland, between the UK and the EU. This could lead to difficulties on both sides.”

The biggest difficulties here in the UK would doubtless be felt by car dealers, but the motor industry seems unable to countenance the possibility of Brexit. No plans have been discussed to replace EU Block Exemption, or how car dealers would cope with a fall in demand for now more expensive EU-produced cars. A recent survey claims that 77% of motor trade professionals believe a vote to remain would be better for the industry but, with the leave vote ahead in the polls by a nose, they may be in for a shock.

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