The automotive supply chain may be early victims of the United Kingdom's expected exit from the European Union (EU).
As the country prepares to leave the EU, concerns are becoming more vocal among international auto executives. They want to know how they can plan their supply chains and bring in and send out parts, sub-assemblies and finished goods from England, Europe, and other parts of the world.
In some ways, it’s a follow-the-money head-scratching puzzle. Auto companies are running the numbers and planning their source-and-fulfilment strategies. They want to know how much will Britain’s exit from the EU will cost their companies in terms of customs fees, the movement of goods across various borders, transportation delays associated with increased paperwork filing and approval, and keeping the factories they set up in the UK working efficiently.
The issue has flared up again in recent weeks.
To avoid the hefty custom charges that will come from moving parts in and out of the country to and from the EU, companies like Nissan are asking the British government and taxpayers to invest in manufacturing and supply chain infrastructure to keep its plant operating smoothly.
The car manufacturer is calling on the government to rebuild its car parts’ business so it can source a greater portion of its bill of materials in-country. A senior Nissan executive told government officials a few weeks ago that because of the lack of car part availability in the UK, the company must source about 85 percent of its parts from Japan, China and Europe, according to this Guardian article. If the parts were available, Nissan would spend up to £2 billion a year with British suppliers, the article noted. Its Sutherland facility’s production lines use about five million parts a day, and the anticipated cost of new tariffs on exports may come to £500 million annual price tag, the article stated, citing the Nissan senior vice president of supply chain manufacturing.
Nissan’s not the only company wondering what happens next. BMW has hinted that the confusion caused in the run-up of Brexit may mean that production of its new electric Mini may move to Germany; most Minis are currently manufactured at the company’s Oxford plant,according to another Guardian article.
Certainly, this kind of talk must make U.K. officials quiver. The country is counting on electric vehicles and battery technology to revitalize its industrial sector, the Guardian article noted along with this Chartered Institute of Procurement & Supply (CIPS) piece.
Obviously, it’s just not car makers that will feel this change, and as UPS logistics firm suggests in this blog post, companies will want to keep tabs on this as Britain and the EU negotiate new policies.
Trade in 2017 may remain relatively status quo as legislation typically moves slow. However, the business and supply chain climate will be increasingly complex for the next five to eight years as issues around the movement of goods and people are nailed down.
While risk management awareness is one aspect of this, it’s hard to miss the underlying opportunities that may also come about. If Nissan is saying it wants to spend millions and millions of pounds British-based supplies, it seems to follow that smart suppliers who set up or expand operations there may win preferred supplier status for this piece of business.
How much of your company’s business is at stake with this geo-political change?