The astonishing turn of events in the UK will clearly be a huge source of concern to car-makers. Right now, it looks as if a ‘no-deal’ Brexit could just end up becoming a harsh reality by end-March when Britain will have bowed out from the European Union.

Volkswagen is definitely worried going by the observations made on its group website. “We are keeping a very close eye on developments and reviewing the entire spectrum of possible effects. We have noted with regret the outcome of the vote in the House of Commons. For us, this means a further period of insecurity and planning uncertainty.”

The reference here is to the Brexit deal proposed by Prime Minister Theresa May, which did not find support in Parliament. The only positive is that she has survived the no-confidence motion but that is not too comforting given the options ahead.

As VW says, “In light of the current difficult situation we continue to prepare for all eventualities. Like the rest of the industrial sector, we need comprehensive clarity on the shape of future relations between the United Kingdom and the European Union very quickly.”

Delay hurting companies

From the German auto-maker’s point of view, any further delay in the Brexit decision-making process “poses a risk to investments and jobs” in the automotive industry, which relies on long-term planning security with development cycles of up to five years.

“We can only appeal to all the parties involved to use the time gained to negotiate a solution acceptable to all stakeholders,” states VW. For the automotive industry, continues the company, open market access and clear customs processes have priority in order to avoid any negative impact on just-in-time production “and our European supply chains”.

This is precisely the concern of other companies too. Jaguar Land Rover (JLR), owned by Tata Motors, has been going through a rough ride in recent months, which has seen job- and cost-cutting measures put in place.

JLR has enough problems in its key market, China, and a no-deal Brexit could just end up being the proverbial last straw. By the end of the day, if any divorce turns out to be expensive, the road ahead will be fraught with problems. This is the grim reality the UK could face in a no-deal Brexit where both imports and exports will become pricier and auto-makers will need to scour for alternatives.

In the case of JLR, the recent commissioning of the Slovakia plant in Eastern Europe will act as a buffer of sorts to offset any negative fallout of Brexit. Yet, it is not as if this can be done overnight and the entire transition exercise will be slow and painful.

The mood was distinctly sombre at the 2018 Paris Motor Show where CEOs were quite candid in admitting that a no-deal Brexit would hardly help their cause. There are some prominent brands in the UK, including those from VW as well as Nissan, Toyota, Vauxhall, BMW, etc. Each of them will be monitoring the coming weeks carefully and keeping their fingers crossed that some kind of solution can be worked out.

The Paris Motor Show also had its share of optimists who insisted that things may not end up becoming so bad eventually. There is some truth in this argument considering that business and politics go hand-in-hand. No government wants industry to suffer since job losses can end up antagonising voters while an economy could just get into free fall mode.

Nobody expected Brexit would actually happen three years ago and when it did, there was a sense of shock and awe. Likewise, the die-hard optimists would be hoping that some kind of truce can be worked out between the EU and Britain, but given the present mood, neither side is in any mood to relent.

From the auto industry’s point of view, a no-deal Brexit is only part of their woes. The VW scam of 2015 has had its impact in giving the cold shoulder to diesel and many parts of Europe are now pushing for cleaner alternatives.

Green lobby concerns

The green lobby will only get more vociferous with its demands and a highly defensive industry really has no choice but to comply with this new regime. Everyone is talking about electric mobility but it is not as if this is a walk in the park. It will need huge investments in R&D as well as in new hires who are not going to come in cheap.

CEOs have admitted that the VW issue has resulted in a loss of credibility for the industry, which now needs to put its house in order all over again. Auto-makers are also grappling with a host of other challenges in mobility as the coming decade will have its share of disruptions.

Beyond Europe and Brexit, it is not as if the world is in the best of shape for the car industry. China is slowing down and that has already set alarm bells ringing. Companies have made huge commitments in the world’s largest automobile market and a slowdown is the last thing they will want in a global arena that is already fraught with problems.

Chinese worries

Further, the recent bout of trade hostilities between China and the US are also posing concerns even while the two temporarily buried the hatchet.

How will the global automobile industry cope with all this tumult and unpredictability? (It may also be mentioned here that Latin America is going through an upheaval of sorts too, which only adds to the worry list). There is really no way out but take the challenge head-on even while being circumspect and taking one thing at a time.

Consolidations will also become inevitable, as in the recent instance of Ford and VW coming together for pick-ups and electric mobility, to save on costs. Optimism is also a great tool going by what VW has to say about the Brexit issue.

“Irrespective of this, the United Kingdom will remain an important market for the Volkswagen Group, the second largest in Europe, as well as an important production and investment location through the Group’s British brand, Bentley Motors.” Hopefully, things will end on a happier note!

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