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Is 'hard Brexit' an opportunity for carmakers?

Vauxhall Image copyright Getty Images

The boss of PSA Group, which is buying Vauxhall and Opel, says that a so-called hard Brexit could present "an opportunity" for the UK car industry.

Carlos Tavares suggests that with potentially high tariffs in Europe, where carmakers could be forced to pay taxes on exports and imports to and from the European Union, it could become more cost-effective to have manufacturing plants in Britain to supply parts for UK-made cars.

He reasons that such an approach would iron-out any volatility in the company's profits.

"A hard Brexit with custom duties and all that stuff, then of course it would be an opportunity for us to have a UK sourcing to source for the UK," he says.

"Of course for that to happen we also need to have the supplier base being devolved in the UK so that the cost structure would be in pounds, the revenue structure would be in pounds and therefore the sensitivity, the volatility on our profit would be lower."

But is the UK car market big enough to support its own components industry?

What Britain makes...and keeps

There are 32 million cars on British roads. And although the UK is the third largest car producer in the European Union, after Germany and Spain according to the European Automobile Manufacturers Association (ACEA), the vast majority of vehicles it makes are exported, while 86% of newly registered vehicles in the UK last year were imported.

Of the 1.72 million cars made in the UK last year, 1.35 million were shipped overseas.

According the Society of Motor Manufacturers and Traders (SMMT), 368,482 passenger vehicles were for the British market.

Image copyright Getty Images
Image caption Vauxhall makes the Astra at its Ellesmere Port plant

Overseas dependence

In terms of British-made components, steps have been taken in recent years to increase the number used in UK cars which, on average, are made-up of 6,000 parts.

According to the SMMT, the average content in a British-built vehicle has increased from 36% in 2011 to 41%. However, the majority still has to come from overseas suppliers.

Another rather puzzling aspect to Mr Tavares's plan is that it appears to run counter to the PSA Group's 2.2bn euro takeover of Vauxhall and Opel.

One of his main aims is to find cost "synergies" to improve profit margins. So the maker of Peugeot, Citroen, Opel and Vauxhall wants to share "more assets, platforms, features and systems".

Mr Tavares adds that exporting will be key to the company's success.

"For many, many years Opel/Vauhall could not export cars outside of Europe. That was something that General Motors didn't want them to do. PSA is going to unleash this potential, we are going to open the gates."

This will happen, he says "soon as the Opel Vauxhall models are using the PSA IP [intellectual property] but, if his earlier statements on a hard Brexit are to be believed, different supply chains.

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