Blog 3: Brexit effects, and how to manage the change.

Prime Minister Theresa May evoked Article 50 in Lisbon Treaty before two years, after she as a Brexiter toke over the wheel from the former prime minister David Cameron was amazed on how the empty gun he threatened the EU with backfired and killed his reputation as a prime minister, which some Remainers thinks that this act is one of the most destructive acts in prime ministers history. after Article 50 the UK got two years to decide on Brexit terms with the EU. This made an uncertain environment for investors in The UK, and as known in business uncertainty is not a good factor for business, stocks and The UK Market (

The German car industry is huge, it was estimated in 2016 that it’s worth 482.7 billion euros (TLRD, 2018), and the biggest market for this industry is The UK (TLRD, 2018), German cars sold in the UK is 769 000 in comparison to the second biggest market The US buying 494 000 cars a year. so it is a huge market according to Kurt-Christian Scheel, CEO of the German Association of the Automotive Industry (VDA), a lobby group that represents BMW, Volkswagen and Daimler (parent company of Mercedes), he said also that Brexit will torn apart the supply chain, and will result in construction of warehouse because supply on demand won’t be possible, and this also will make car companies remove their manufactories from the UK back to the EU which will result in huge job losses as he said “The UK will be hit harder” (Macbeth, 2018).

Now let’s discuss BMW Group Problems with Brevet in specific, UK made 9.8% of the German group car sales in 2017 which is the fourth biggest market for the group (BMWGroup, 2018).

Screen Shot 2019-01-08 at 3.45.48 AM.png

The sales volume at 241,674 in 2017 units was  down on the previous year (2016: 252,205 units; – 4.2 %) as a side effect that the uncertainty of Brexit brought among (BMW, 2018), we can see in the below figure that the UK was a healthy growing market until 2016 when Article 50 was triggered, we can calculate from the figure the growth rate in 2014 was 8.5%, 2015 was 12.6%, and 2016 8.4% which averaged a growth rate of 9.8% increase comparing to the 4.2% drop in 2017, so it is obvious that Brexit affected BMW Group before it happens (BMWGroup, 2018).

Screen Shot 2019-01-08 at 3.45.58 AM.png

On the other hand BMW Group have four production plants in the UK, Oxford and Goodwood plants which they are responsible of 9% of BMW car Production (producing: Rolls-Royce Phantom, Ghost, Wraith, Dawn, MINI Hatch, and MINI Clubman), which is a big percentage almost the same as the UK market share of car delivers for the brand. to be more analytical we can not say it is not a problem because the production % is similar to the selling % because the UK plants do not produce all models. In addition to the other two plant in Ham Hall and Swindon which produces petrol and plug-in hybrid engines in addition to body parts (BMWGroup, 2018).

As Kurt-Christian Scheel said that the supply chain will be torn apart, and taking into consideration how important the UK is to the BMW Group by representing around 10% of it sales and production, a solution must be Developed. a perfect and logical solution is to treat the UK as a separate market, and that’s how BMW Group manage the US and Chinese markets the second and the first biggest markets each with it special situation (BMWGroup, 2018). if the situation after Brexit is like the US (an open market) BMW will apply a similar plan to harvest the positives that Brexit may result with UK trade with some countries outside the EU if the UK had better deals with those countries than the EU. or to deal with the UK as they managed the chinese government strict polices by making a similar deal to the BMW Group joint venture with their Chinese partners (Wilmot, 2018).

To Design an action plan we should discuss the two situations. First the the Chinese situation which is highly not going to happen because of the vast differences between the two countries policies and approach to the world trade. So let’s be realistic and apply the BMW market strategy in the US. They have to expand their model production in the UK plants, to include more models to reach a level of self-sufficiency within the UK market in order to maintain prices as low as they are before Brexit, and not to constraint on specific models because they will cost more to sell them in the EU by replacing specialized plants back to the EU.

what we Learned is Brexit effects markets in a huge matter that even the possibility of it happens can decrease market growth, and big international companies have to always deal with the ever-changing laws and polices of countries and manage the change in a sufficient way.

 

References 

Wilmot, Stephen. 2018. Detroit Can’t Follow BMW’s Lead in China; It will be hard for U.S. manufacturers to follow BMW’s lead, given trade tensions.. [ONLINE] Available at: https://search.proquest.com/central/docview/2117838223/947B80D7C040B7PQ/22?accountid=10286. [Accessed 12 November 2018].
Statista. 2018. • BMW UK sales 2018 | Statistic. [ONLINE] Available at: https://www.statista.com/statistics/300405/bmw-car-sales-in-the-united-kingdom/. [Accessed 12 November 2018].
SMMT. 2018. UK new car market falls in ‘exceptional’ September as supply issues bite – SMMT. [ONLINE] Available at: https://www.smmt.co.uk/2018/10/uk-new-car-market-falls-in-exceptional-september-as-supply-issues-bite/. [Accessed 12 November 2018].
TLDR News. 2019. Will the UK Cancel Brexit? – TLDR News. [ONLINE] Available at: http://tldrnews.co.uk/cancel-brexit/. [Accessed 08 January 2019].
Alex Macbeth. 2018. Brexit and German cars: Britain will suffer most from a rupture. [ONLINE] Available at: https://www.thelocal.de/20180314/german-car-chief-the-automotive-industry-needs-stability. [Accessed 8 January 2019].
Routhwell, Capurro and Midgley. 2019. What is Article 50? The only explanation you need to read. [ONLINE] Available at: https://www.telegraph.co.uk/politics/0/what-is-article-50-the-only-explanation-you-need-to-read/. [Accessed 08 January 2019].
BMW Group – English. 2018. BMW Group – English. [ONLINE] Available at: https://www.bmwgroup.com/content/dam/bmw-group-websites/bmwgroup_com/ir/downloads/en/2018/Geschäftsbericht/BMW-GB17_en_Finanzbericht_ONLINE.pdf. [Accessed 12 November 2018].

 

2 thoughts on “Blog 3: Brexit effects, and how to manage the change.”

  1. Thanks Mate,
    for me I don’t think it will happen, I think that the people now know more about brexit comparing when they made the referendum and also the Brexiters immigration card is now outplayed and expired, and to have a second referendum is becoming harder due to the lack of time, about May’s deal passing the house of comments is also unlikely because the stacks are against her in my opinion.

    Like

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