Brexit & Covid

We are living in tumultuous times with Covid restrictions impacting the economy and the Brexit Transition Period coming to an end on 31 December.  Deal or No Deal, both of these issues will have a short term impact on the economy, but how will it affect the motor industry?

It emerged at the end of September that car parts from Japan and Turkey, which are used in the UK, will not be treated as British. Subsequently, some exports may see higher tariffs whether on World Trade Organization (WTO) terms or a trade deal. This is likely to push up the price of new cars, make them less desirable as imports and they will no doubt be subject to tariffs also.  Indeed, under WTO rules, imported cars will be subject to a 10% price uplift and vans possibly more.

Conversely though, this may have benefits for the used car market as customers eschew brand new cars in favour of good quality second-hand vehicles that are already in the UK and not subject to tariffs.  However, this is unlikely to be a long term gain as nearly new cars cannot remain unaffected by tariffs for too long because they will no longer be classed as nearly new.

Covid is also having an impact. Many factories were closed down for months due to lockdown and production is therefore far down on normal levels. We have customers who deal in new vehicles that are sourced via brokers away from the main dealer market. As main dealers are prioritised, these over production cars are not available, so orders with these companies cannot be fulfilled thus causing a termination of contract situation which inevitably leads to unhappy customers, the return of the deposit and the potential for legal action for not fulfilling the contract.

So, whatever your place in the market, there is bound to be some impact on your business. If you have not done so already, review your terms and conditions. Check to ensure that the influence of Brexit and/or Covid doesn’t wipe out your profit margin and can be borne by the customer as far as is commercially possible.

 

Authors: Darren Fletcher

Published: 12 Oct 2020

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