Car makers began to assess the cost of Britain’s vote to leave the European Union, calling on politicians to protect free trade and warning they might have to raise prices and cut jobs.
The auto industry was at the forefront of efforts by big business to persuade voters in Thursday’s referendum to choose to stay — arguing that Brexit posed serious threats to UK economic interests.
European and Asian automakers’ shares fell sharply as investors weighed up the consequences.
PSA Group’s sizeable UK sales are among the most vulnerable, analysts say, because it lacks any local production to offset the sliding value of sterling revenue.
The French car maker said it would likely be forced to raise prices — bound to dent the competitiveness of its Peugeots and Citroens in a market now expected to shrink.
Managers are “looking at different scenarios for price adjustments to our brands’ models to respond swiftly to the markets’ reaction,” a spokesman said, adding that it was “still too early to measure the real impact.”
Of the Asian car makers, Nissan is among the most exposed through its huge Sunderland assembly plant serving Europe and beyond.
The company said it had nothing to add to chief executive Carlos Ghosn’s recent warning that a leave vote could hit investment.
“There are going to be a lot of questions about (whether) you want to continue to invest in the UK for Europe if the UK is outside Europe,” Ghosn, who heads both Nissan and its alliance partner Renault, told CNBC last week.
Jaguar Land Rover, Britain’s biggest car maker with 25,000 jobs in the country, tried to inject a note of calm, stressing that “nothing will change for us or the automotive industry overnight”. But the Indian-owned firm fears Brexit will wipe £1bn ($1.37bn) from annual profit within a few years, sources told Reuters this week, citing internal documents.
The auto industry, which punches above its weight in politically sensitive manufacturing jobs and lobbying clout, employs 770,000 people in the UK, where car sales are expected to tumble 10% by the end of the year as consumers shun big-ticket purchases, according to brokerage Evercore ISI.
“Even the most ardent Brexit supporter is likely to harbour near-term concerns around job security and property values,” analyst Arndt Ellinghorst said in a note reissued to clients after the vote.
Some manufacturers sounded new warnings about jobs and investment.
Ford, which employs 14,000 British workers mainly in engine manufacturing, vowed to “take whatever action is needed to ensure that our European business remains competitive and keeps to the path toward sustainable profitability”. Sports car maker Aston Martin, with 1,800 UK jobs, may seek more “productivity and efficiency” gains to mitigate eventual repercussions, CEO Andy Palmer told Reuters. But Aston, the supplier of James Bond cars and real-world models such as the Vantage two-seater, expects the weaker pound to soften the immediate blow by making its vehicles more price-competitive.
Sterling’s weakness offers a temporary cost cushion to vehicles and parts manufactured in Britain for the likes of Nissan, JLR and BMW — even as it punishes PSA, Nissan parent Renault and others heavily reliant on imports.
That may upset some closely fought rivalries such as the imported Volkswagen Golf’s tussle with GM’s UK-built Opel/Vauxhall Astra. Several manufacturers, including Opel and Aston, urged political leaders to safeguard EU-UK free trade as part of an eventual Brexit settlement.
“We fully support the UK remaining part of the European Economic Area,” Germany-based Opel said in a statement, echoing comments made by Palmer.
London must now “secure a deal with the EU which safeguards UK automotive interests,” the Aston CEO said. “This includes securing tariff-free access to European and other global markets.”
In a statement by its VDA lobby group, Germany’s powerful auto industry said “the core idea of a common market must be brought back into focus” as the EU reforms to restore its appeal to voters.
Britain is the German car makers’ biggest export market, snapping up 810,000 German-made vehicles last year.
But Daimler boss Dieter Zetsche sounded a more circumspect note, saying that it was “certainly not” a good day for the UK.
The Mercedes maker expects to suffer no immediate impact, Zetsche added.”Geographically the country may be an island — politically and economically it is not.”