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Paris Auto Show: Brexit Fears Spook Carmakers

Paris Auto Show: Brexit Fears Spook Carmakers.

“If you ask me for my gut feeling, I have difficulty imagining something will happen that will go against the economic interest of the country,”

Europe’s carmakers, gathered in Paris for the biennial auto show, are getting increasingly nervous about the lethal prospects for Brexit, which will be imminent when they assemble again for the next big show in Geneva in early March.

Britain leaves the European Union, otherwise known as Brexit, on March 29, 2019. Currently, trade between the EU’s member states and Britain is as free as if it was a single country. Big auto makers in Britain, like Toyota, Nissan, Honda, BMW’s Mini and Jaguar Land Rover, have built up highly honed supply chains. If these supply chains are interrupted, it won’t take long for production to sputter.

Britain and the EU are have been negotiating an exit deal for a couple of years and it is still not clear what kind of arrangement will be agreed.

There’s no shortage of critics saying the talks will crash and burn, which would force Britain to conduct its foreign trade under World Trade Organisation terms. This so-called “hard Brexit” outcome could lead to short-term problems at borders as the current free-flow of thousands of trucks carrying essential parts for just-in-time factory use, ground to a halt. This would quickly shut down Britain’s car industry and cause monster traffic build-ups at ports between France and Britain.

Optimists say it will be all right on the night, and a mutually beneficial deal will be hammered out. But it is the nature of these negotiations that both sides are keeping their cards close to their chests, so there is no way for outsiders to really find out what the prospects are.

Both sides have a huge interest in keeping trade flowing freely, but that’s no reassurance to carmakers.

At Paris show Tuesday, Toyota said if there was a “hard Brexit” it would disrupt its weekly revenue of $78 million from its British operation.

Toyota speaks
Toyota Europe President Johan van Zyl said on Monday a “hard Brexit” would force a temporary closure of its Burnaston, England, plant, where it made 144,000 vehicles last year. It has an engine plant in Deeside, Wales.

Toyota launched its Corolla Touring Sports wagon at the show.

If there is no trade agreement between the EU and Britain, BMW would shift more production of its Minis to the Netherlands.

“We are preparing for hard Brexit, that will be a lose-lose situation (for the UK and the EU),” Group CEO Harald Krueger told journalists at the Paris auto on Tuesday.

“Hard Brexit is currently not our main scenario, but we are preparing for it. We see a 50:50 chance,” Krueger said.

It wasn’t all doom and gloom. Renault CEO Carlos Ghosn reckoned the two sides would reach an agreement on Brexit that satisfied both sides.

“If you ask me for my gut feeling, I have difficulty imagining that something will happen that will go against the economic interest of the country,” Ghosn told reporters at the show.

Ghosn led the Renault Nissan alliance since 1999. Nissan has a factory in Sunderland, England, which made just over 500,000 vehicles last year, mainly Qashqais and Jukes, but also Leaf electric vehicles and the Infiniti QX30.

Most vocal protests against the possibilities of a Brexit debacle have come from Tata of India’s JLR, which makes Jaguars and Land Rovers and is particularly at risk because it was caught out by the sudden demise of diesel power in Europe. Last year close to 90% of its production had diesel engines.

Meanwhile at Mondial de l’Automobile press preview day Tuesday,

BMW grabbed the spotlight with its all-new 7th generation 3-Series. This small sedan will compete against the Alfa Romeo Giulia, Jaguar XE and Volvo S60.

Electric cars were to the fore with the debuts of the Audi E-tron and Mercedes EQC. Tesla showed its Model 3 in Paris, as a prelude to its first sales in Europe next year.

Down at the affordable end of the market, was the new generation Suzuki Jimny. This rugged little off-roader hasn’t been updated for nearly 20 years. Suzuki withdrew from the U.S. market in 2012.

Europeans have followed the U.S. love affair with SUVs and there are plenty to choose from at the show. Audi launched its Q3 compact SUV, which competes with the BMW X1. Volkswagen subsidiary SEAT launched launch its mid-size SUV, the Tarraco, a 3-row model which competes with the Nissan X-Trail and Peugeot 5008. VW already sells its own brand version, the Tiguan, and Skoda, another VW subsidiary, sells the Kodiaq.

Mondial de l’Automobile is missing many key players, who have declined to attend. The list of the absent includes Volkswagen, Subaru, Volvo, Mazda, Mini, Mitsubishi, Ford, Nissan, Bentley, Fiat Chrysler and its Alfa Romeo and Jeep brands.

The show opens October 4 through 14 at the Porte de Versailles, Paris.


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