At Pike + Bambridge, we are generally excited about the upcoming disruption in the car industry, whether that be electric cars, autonomous cars or the changing way that people buy cars, moving away from the old-fashioned dealership model.
One piece of looming potential disruption that doesn’t excite us is the potential for disruption to the car market where the UK goes through a ‘No-deal’ Brexit.
With many of our clients recently asking our thoughts on the impact this outcome may have for our market in particular, we decided to put our thoughts down in writing.
Please bear in mind this piece has been written on Tuesday 19th February, and as we all experience relatively unprecedented upheaval across the UK, this may have changed entirely by Wednesday 20th February. If you do need to speak to us regarding anything we can advise on, we are here to offer our personal, advisory service at all times.
Firstly, starting with some positives. Last year was a well-publicised challenging year for the UK motor industry as a whole, with new car registrations dropping by over 5%. What has been generally ignored is why this happened. In the main, the drop in registrations was down to the poor handling by the industry of the new ‘WLTP’ emissions standards, and much of that drop was actually due to delayed delivery of cars, rather than demand dropping off dramatically. Leasing companies saw a 700% increase in extensions of leases while their clients awaited their much-delayed new car.
What this means for you?
The good news is the manufacturers are already attempting to recover from a bad year, and now have the looming possibility of import tariffs on cars coming in to the UK post March 29th. Bearing in mind the UK has been the ‘star’ of the European car industry over the past 10 years, this poses a major problem for them.
Therefore, manufacturers are rushing to offer special offers that ‘must be registered by 31st March’ and normally delivered by the end of April. See one such example below.
If you do have the ability to move forward on one of these offers, they will represent good value, particularly as they also avoid the government hike in road tax on the 1st April.
Like every industry in the UK at present, the impact of a potential ‘No-Deal’ Brexit is much harder to predict.
Volkswagen Audi Group, the largest car company in the world, incorporating VW, Audi, Seat, Skoda and Porsche, broke ranks recently warning that cars already on order may be subject to price changes should we suffer a ‘No-Deal’ Brexit.
There are also rumours of European manufacturers limiting right hand drive car production, in case there is a logjam of imports, to avoid them having stock sitting awaiting delivery, a major cost to any manufacturer.
Even UK-manufactured cars are not immune. The likes of Jaguar Land Rover depend on components (things like door handles) to be imported from the EU, often from countries such as Romania.
All told, in the event of a ‘No-Deal’, we would predict that used car values may well increase, as a result of basic supply and demand pressures, and cars in stock or pre-registered cars will be in high demand.
We are advising clients who are looking to change their vehicles in the first half of 2019, time is pressing to do so. With makes such as Volvo already quoting June delivery for new cars, without any No-Deal contingency built in, it may be an expensive decision to delay.
Those who are planning to renew or change their vehicles from July onwards may well be wise to see how the lie of the land is once we arrive in April itself.
As ever, at Pike + Bambridge, we will continue to deliver our clients an expert and advisory service with the clients’ best interests as the primary focus.