Brexit and its impact in the automotive industry

The shock waves from the UK’s historic vote to leave the EU are about to hit the global auto industry

Analysts predict that falling sales and rising costs are the most likely outcomes for automakers as Europe’s second-largest car market begins severing long-standing ties with the region that buys the greatest proportion of the UK’s home-produced vehicles.

“80% of what we produce is exported and the only way to succeed is through unrestricted and reciprocal access to the EU and global markets.” says Mike Hawes, Head of the Society of Motor Manufacturers and Traders.

Automakers were already struggling to make money. “Europe has gone from the most profitable region in the world in 2007 to the least profitable,” said Erik Jonnaert, secretary general of ACEA, the European automakers association, citing the cost of meeting increasingly stringent regulations.

“Brexit adds further ballast to an already struggling ship,” said London-based Evercore ISI analyst Arndt Ellinghorst. He listed concerns over U.S. sales, industry disruption, regulatory headwinds, and uncertainty over future mobility.

57 percent of the 1.6 million cars the UK built last year are sold in Europe and they will still need to conform to EU regulations. That means hitting stringent targets for gasoline and diesel emissions, as well meet crash standards.

The number employed in the sector rose by 17,000 to 814,000 and there was a 5% rise in vehicle production to 1.7 million in 2015. For this and more, automakers could move production elsewhere if the EU imposes tariffs on UK-made vehicles.