A New Driving Force: The Impact Of Brexit On The Car Industry
30th Dec, 2016
Brexit was one of the biggest upsets of 2016, upstaged only by the results of the American election. With the UK still split 50-50 on the decision, it remains a hugely controversial issue, and one with far-reaching implications. The British motor industry – and by extension the scrap car sector – are amongst the foremost to be feeling those effects, and nervously preparing for a new dawn. So what are industry experts worried about?
Pumping The Brakes
One of the immediate effects of Brexit the motor industry is looking at is a slowdown on car sales. Although fleet buying seems to be continuing reasonably steadily, concerns over the UK’s economic health mean that we’re already seeing the first signs of falling sales to retail buyers. After all, whatever your income, buying a car is never a trivial decision – there’s a lot of thought as to what you’ll use it for, when, and what it needs to do. A lot of people now seem to be holding off from making this decision, apparently due to economic uncertainty.
Meanwhile, the scrap car industry is still going strong. Our sector, while not immune to the implications of Brexit, isn’t affected on quite such an immediate or dramatic scale as the mainstream motor industry. While sales of brand-new cars fall, it’s possible that the sales of recycled and second-hand ones – which are often a lot cheaper and therefore sometimes pose less of a financial risk – could rise to fill the gap.
Backing Out Slowly
Similarly, Brexit spells bad news for a lot of major automotive manufacturers, who are suddenly faced with potential difficulties in making and selling their products. Toyota is a prime example of such a manufacturer, as its manufacturing capability is heavily based in Britain. If the British exit from the European Union is too protracted, complex or even hostile, Toyota is one of the many companies that face the prospect of higher tariffs, and reduced access to the 500 million potential customers across Europe.
Other manufacturers are being forced to consider the prospects of similar threats, though on varying levels depending on the scale of their operations in Britain. If they decide to base their operations elsewhere, the impact of this coupled with the decreasing value of the pound could well notably increase the price of brand new cars. This, too, is likely to have a knock-on effect on the scrap car industry. With rising prices of newer cars, people are increasingly likely to turn to second hand models, the prices of which would be less immediately affected by such dramatic market shifts.
A Shift In Gear
Toyota is also among the large group of car manufacturers urgently holding talks with the government about preserving the integrity of their manufacturing processes. Toyota operates a ‘just in time’ process, in which parts are shipped to their factories and arrive just a few hours before assembly. About 60% of the parts supplied for cars built in the UK are imported from elsewhere in Europe. If Brexit impacts this process too heavily, it could spell disaster for companies like Toyota.
The results of this potential disruption might see a new reliance on the scrap car market to provide good quality working parts, which would be an attractive alternative for many to spending drastically more on buying new ones.
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