No one knows for sure, and we probably won’t truly understand the impact of Britain’s exit from the European Union on the global economy for years to come. However, it’s safe to assume we are going to see a significant slowdown in European auto manufacturing and sales, at best. Economic analysts predict as much as a billion-dollar loss in profits and nearly a million fewer new-vehicle sales in the next three years. Auto manufacturers themselves have begun making tentative statements on the situation, which can be summarized in one word — uncertainty.
So let’s take a step back, what is Brexit? Simply put, the people of Britain voted to leave the European Union, which is a group of European countries who share a free trade zone where no tariffs are imposed on goods traded between countries. Meaning a car can be produced in one country and sold in another without incurring a government-imposed change in price, as long as they are within the free trade zone.
Britain’s decision to leave the EU means that these trade agreements will need to be renegotiated, and if tariffs are imposed on goods exported from Britain to Europe, the impact on the industry could be devastating. The Chicken Tax, instituted in 1963, is an excellent example of just how effective tariffs can be at manipulating the automotive industry.
Now, if Britain and what remains of the EU decide not to impose any additional tariffs, automotive production and sales across Europe would remain largely unchanged. However, if they do, I suspect we will see a dramatic shift in where vehicles are produced and sold across Europe. This could lead to European manufacturers pulling certain models or brands from the British market because it would be too expensive to import them, and companies currently manufacturing vehicles or components in Britain restructuring their operations to avoid shipping products across borders. Vehicles sold in Britain would need to be manufactured in Britain, and vehicles sold in the EU would need to be manufactured in the EU. In short, the automotive industry is watching British lawmakers with bated breath, waiting for them to determine their future.
Is there a silver lining to all of this mess? Well, if you happen to have some money burning a hole in your pocket and have been thinking about importing a classic British car, then yes. Since Brexit, the pound has fallen sharply against the dollar, which means that old right-hand-drive Land Rover you’ve been eyeing just got significantly less expensive to import.