IT seems appropriate, given that 2019 was undeniably a tough year for UK car dealerships, to look into 2020 and ask the question: will things get better now Boris Johnson’s Transition Deal will be implemented by the end of this month?
In essence the Transition Deal means:
- Once implemented, the Deal will give us 11-months of intense negotiations to carve out a trade deal with the EU.
- Due to the tight deadline and given the complexity of these negotiations, a ‘No Deal Brexit’ is still a very real prospect come the end of 2020.
- The mid-year deadline of 30th June is worth noting as this is the date for securing a 1 to 2 year extension to potentially take trade negotiations right through to the end of 2022.
- Given Johnson’s heavy emphasis in the Election on ‘Getting Brexit Done’, it seems likely that a stripped down deal will be hammered out as early as the 30th June and the details clarified as far as possible before the end of 2020.
- Indeed, the Conservative Manifesto promises that we will be out of the single market, the Customs Union, and no longer defer to the European Court of Justice’s judgements – all by exiting at the end of this year.
So, the Election has not only handed Boris Johnson a mandate for completing Brexit as quickly as possible, but it has also left the option of a ‘Hard Brexit’ firmly on the table. Whatever your personal views about Brexit, the timetable for agreeing a comprehensive Free Trade Agreement with the EU looks incredibly tough.
What can we expect?
Given this backdrop, what can the automotive market expect in 2020? Whatever happens, the new Government will not be allowed to forget the importance of the Automotive sector to the UK economy.
As Mike Hawes, CEO of the Society of Motor Manufacturers and Traders (SMMT) said: “When Automotive succeeds so does Britain, so we look to the new Government to maintain our global competitiveness which means delivering a deal with the EU that is ambitious, maintains free and frictionless trade, and drives growth and innovation to meet shared environmental goals.”
Our sector is a visible talisman for the UK economy, particularly across England’s central belt stretching from the West Midlands to the Northeast – the part of the country which delivered a massive swing away from Labour and into the arms of the Conservatives.
Johnson must know that there are already issues facing the industry, as the SMMT states in its latest update: “Car production in the UK fell significantly in November, down -16.5%, with 107,753 units manufacture.
“Trends seen throughout the year, including soft consumer and business confidence, weak demand in overseas markets and model production changes, combined to impact output in the month.
“An additional factor in the poor performance was the factory shutdowns around Halloween, planned closures to mitigate against any disruption arising from the potential departure of the UK from the EU without a deal on 31 October.
“These stoppages were in addition to those in April, when car production fell -44.5%, and add to the list of costly Brexit contingency measures implemented by the automotive sector – a bill that stands at more than £500 million.”
The Brexit effect
Brexit uncertainty affected sales in car dealerships in 2019 but the wider move away from diesel towards electrification also has an impact.
The push to go electric will no doubt be further stimulated by the new EU fleet-wide average of 95g CO2/km emissions target for new cars which will be phased in this year. But that leaves a lot to do:
- Electrification demands very significant new investment in plant, equipment, R&D, training and recruitment.
- It also demands considerable investment in recharging infrastructure, battery technology R&D and new plants to produce the next generation of electric vehicles.
- Companies producing traditional ICE engines and parts need to begin retooling and reskilling.
Government support is needed to ease these costs if OEMs are to keep up with the pace of change in Germany and beyond.
There is no doubt that 2020 will be a year of continued significant and disruptive change for OEMs and, by extension, dealerships. The emphasis must be on celebrating the successes which show the way towards creating a sustainable automotive sector fit for a fossil fuel free future.
Those that embrace this change and recognise the opportunities, as well as the challenges, will be the winners in years to come. However, the work needs to start now. Focusing on building news skills and services and staying close to customers to retain them through the transition, will be all-important in 2020 and beyond.