If I were BMW….

The Germans are not going to stop selling us BMWs, nor are the French going to stop selling wine, cheese and apples just because we are not in the EU. It is not in their interests.

The words of Chris Grayling, MP, and repeated more or less by all main Leave campaigners.  It’s a powerful argument, the Germans have a huge trade surplus with the UK and the German car makers in particular won’t want to lose their biggest market, so they’ll help us get a good deal from the EU after Brexit.  Won’t they?

Well, lets look at that.  It’s true that Germany has a significant interest in the UK car market:

Germany sells more cars to Britain than to any other country, with 810,000 exported last year, Mr Wissman said. And half of the 2.6million cars made in Britain last year were built by German-owned firms such as BMW, which runs Mini and Rolls-Royce.

It’s also true that the UK has significant car exports to Europe, about 1.2 Million last year, and obviously, a good number of those were built by German owned firms in the UK.

But lets look at this from 2 perspectives.  If you were BMW would you think:

We sell a lot of cars to the UK, and we build a lot of cars there too.  It’s a lot of our market and we’re really exposed.  There’s at least 3 years before Article 50 is completed and even then we won’t know exactly where we will be.  It could be harder to sell our cars into the UK.

We need to apply pressure to the German government and the EU, I know it won’t make us popular because public opinion in the EU is against a cherry pick deal for the UK, but that’s the best way for us to maintain the status quo, to apply pressure and hope things turn out OK

That’s what Chris Grayling thinks the German car makers will do, it’s what everyone who supports Leave thinks the German car makers will do.  But here’s an alternative:

We sell a lot of cars to the UK, and we build a lot of cars there too.  It’s a lot of our market and we’re really exposed.  There’s at least 3 years before Article 50 is completed and even then we won’t know exactly where we will be.  It could be harder to sell our cars into the UK.

So we have 3 years at least to solve this, maybe more.  Nissan UK sells 250K cars into Europe and THEY are going to find it harder to sell, especially as the UK is non too popular in the EU right now.  We can go after some of that market share, especially if we move UK based production back into the EU.  Yes we’ll take a bit of a hit but the UK middle classes will still buy our high end cars so it won’t be too bad. Regardless, we’re not going to sit around and see 10% of sales disappear.  We can turn this into an opportunity.  After all, what do we owe the UK anymore?

Unfortunately the Leave campaign behaves as if the EU is completely passive just waiting on the UK to take action, a dinosaur who just wants to protect the current situation.  Yes, its possible BMW, Volkswagen and others will think applying pressure to the EU governments is the way to go, but really?  They have perhaps 3-5 years to take action.

What’s more, any UK deal could destabilise the EU, and the EU market for Germany is 6.7 x the size of the UK one.

german-export-shares
Blue=Eurozone, Green=Non Eurozone EU without UK

What do you expect them to do?

What would you do?

That trade deficit?  Don’t bank on it being there in 3 years time.

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3 thoughts on “If I were BMW….

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