As the market players remained wary on the complex series of negotiations between the U.K and the European Union, the global auto industry was shaken after the market opened on Monday.
Investors expected the relative effect of the Brexit vote in the vehicle industry, considering 58 percent of the cars being exported to the members of the union were assembled in Britain. The market fears that the countries under the union might implement 10 percent tariff on the exported vehicles and approximately 2.7 percent to the exported auto parts.
GM Faces Brexit Aftermath
Before the vote was concluded, General Motors admitted the huge consequence of the referendum on its operation and production. The United Kingdom remains to be the fourth-largest global market for GM and the largest European market.
“We employ over 4,500 people directly and 11,000 indirectly in our retailer network and supply chain there. Not to be part of the EU would be undesirable for our business and the sector as a whole,” General Motors explained.
Brian Johnson, an auto analyst from Barclays estimated that General Motors’ pretax profit in Europe might decline by $25 million, while Ford’s would be around $48 million lesser. Jaguar Land Rover forecasted a fall of $1.47 billion on its yearly income.
Germany’s Automotive Industry
Meanwhile, Germany has clarified the stand of its automotive sector after the Brexit vote. German Association of the Automotive Industry (VDA) was against the speculated custom barriers to be implemented by the EU.
In 2015, there were around 800,000 passenger cars made in Germany and the passenger car market volume soared by 2.6 million cars in Britain. The German automotive firms has increased by 30 percent with approximately a hundred of facilities in Britain. The said vehicle makers had an increase of 9 percent in terms of year-to-date production.
Matthias Wissman, VDA president, expressed his disagreement with the possible barriers on goods. He noted in his statement that it will be in nobody's interest to make the international flow of goods more expensive by erecting customs barriers between Britain and the European continent.
“But now it is more important than ever for Europe to stand together to avoid a possible domino effect. Every possible measure must be undertaken to enable the continued free movement of goods and services between the UK and the other EU countries.And even after leaving, free exchange of goods with the Continent will still be to Britain's net advantage,” Mr. Wissman said.
Bumpy Road for Japanese Auto makers
Separately, the Japanese automakers experienced a slide of the auto stocks due to a huge current investment in the automobile production in the United Kingdom.
The shares of Toyota Motor Corporation and Nissan Motor Motor Corporation declined by 1.7 percent and 2.5 percent, respectively. Toyota has invested £2.2 billion in the vehicles made in the United Kingdom while Nissan has around £3.7 billion investment in the sector.
Automobile companies shared the same anxiety towards the possible increase of tariffs and the probability of Japanese companies moving out from their headquarters in Europe. Daisuke Yamaguchi, a director of Japan External Trade Organization said that higher tariffs could force British auto plants to pay more to procure auto parts.
In the view of the further impact of the Brexit in the auto industry in Japan. Officials of the Japanese companies and the government had a discussion. Shigeru Hayakawa, a Toyota senior managing officer, after the meeting, relayed to the press that they will carefully analyze various aspects of the matter, given that there are still many uncertain factors.
Did you find this FSM News article interesting and informative? Why not subscribe to our newsletter? FSM News provides daily newsletters to keep our readers updated on the biggest market affairs. Subscribe now to FSM News!
Subscribing is easy! Simply go to FSM News' homepage, scroll to the bottom, input your e-mail, select your preferred news category/ies, and hit subsrcibe.