THE INSIDE MAN

Brexit: What can possibly go wrong?

Brexit: What can possibly go wrong? image

Text: Tito F. Hermoso / Photos: Autoindustriya.com | posted July 04, 2016 17:56

Brexit, the EU car market and TGT (The Grand Tour)

What could possibly go wrong? 

Without a doubt, the British people's Referendum vote to leave the European Union is already causing so much turmoil in the world's capital (stock) and money (currency) markets. But truth be told, Britain or the UK (United Kingdom) to be precise, will still be an EU member for the next 2 years, at least, as the EU's other 27 member-nations determine UK's mode of exit. This entails laborious unraveling, re-defining and possible abrogation of hundreds of treaties on trade, transport, immigration, labor, taxation, banking, broadcasting, copyright, agriculture, education, etc. And being the EU, nothing gets approved unless the decision is unanimous among all the 28 member countries. Take note though that since the UK is choosing to exit, it cannot be part of the deliberations of the rest of the 27 nations in deciding the UK's future status.

Article 50, more importantly, the countdown to the exiting member's last 2 years of membership doesn't begin until Britain formally applies for "Article 50" of the EU bylaws from Lisbon 2009. Which it hasn't. Why? Besides a looming change of administration and PM (Prime Minister), Britain's "Leave camp" — the group that campaigned for "Brexit" — do not have a clue nor even a credible transition plan. And since Britain's current administration — the "Remain" camp — was for staying, they too do not have a plan to transition to exit as they were only in favor of the status quo.

Leave to be left alone in recession

With the victory of the "Leave" camp, Britain throws the UK, the EU and the world Economy (that is inescapably linked to Britain) into uncharted territory. An EU member leaving, its 2nd largest economy at that, can only resulting in uncertainty, the kind of phenomenon that will make a Recession, as the Remain camp claims, a self-fulfilling prophecy.

What happens now?

To answer the question looming in all the Global Auto Industry's participants minds — motorists, car enthusiasts, traders, importers, OEM suppliers, assemblers, manufacturers, etc. — the short answer is nothing. It's still the status quo, tomorrow, next week, next year and easily more than two years later as you read this, simply because the UK is still an EU member, with complete access to all the privileges of an EU member.

It's the uncertainty, stupid!

But the uncertainty backlash that are floating fears of a recession has already affected the international stock price of many car companies dependent on Britain for supplies and export sales. The GBP or British Pound and the EU's Euro have dropped in value against the US Dollar and Japanese Yen. This currency gyration will make cars and parts imported into Britain a bit more dear, while cars and parts exported by Britain will be somewhat cheaper during this interregnum until Britain completely loses its EU membership.

Too clever by half

The Leave camp believes that the UK is too important a market to the EU that they can have their cake and eat it too i.e., the UK keeps tariff free access to the EU single market while opting out of the liberal pro-migration freedom of people movement mantra of the EU. But then the EU is founded on the twin uncompromising and dependent pillars of freedom of movement of both goods and people, their very definition of a single market. One cannot be a member without complying to both freedoms. Judging by the attitude of most of the EU members, almost all incensed with a slight difference in degree, all are scathing to deny Britain the same privileges it had as a member as it exits. Perfidious Albion strikes again and the EU members will not take it lying down.

To stay or not to stay?

The car companies will have to figure out if they wish to continue to base component or car manufacturing in Britain because when the UK is no longer an EU member in 2 years time, imports into the EU from Britain will resume being subject to tariffs. No more tax exemption. Honda, Toyota and Nissan made the UK the manufacturing base to supply models to the EU markets. When Britain loses its tax exempt status, the Japanese car makers will need to build new factories in a more hospitable EU country for they will be loathe to give up having a car making base within the EU. Ford and GM-Vauxhall will also be in the same predicament. Spain, Portugal, Hungary, Poland, Czech and Slovakia all have more investor friendly regimes and are eagerly waiting in the wings.

The British advantage

German companies that own British brands — BMW's MINI and Rolls Royce and Volkswagen's Bentley — will have a lot of cost adjustments to deal with from increased expenses for their EU-commuting executive class to the cost of higher tariffs for British made goods as Britain and the rest of the EU are co-dependent on their integral supply chains. Morgan, McLaren, Aston Martin, Jaguar-Land Rover and Lotus, the latter three foreign owned but British based will also need to re-assess their pricing and production costs, although the more premium priced among these brands — a British hallmark — will have plenty of room to absorb Brexit related increased costs. As for ASEAN C.B.U. exports of Toyota Hi-Lux, Ford Ranger, Mitsubishi L200 (Strada/Triton) and Isuzu D-MAX to Britain, ASEAN will have to negotiate a new trade treaty with the UK as EU treaties with ASEAN will no longer apply to Britain in a few years time. The bright and resilient spot is the UK's increasing monopoly-like hold in designing, refining and creating F-1 racing cars and its increasingly complicated telemetry — EU or no EU, the UK will remain the fount of racing technology.

The Grand Tour's three stooges

My concerns are how Brexit will impact the upcoming and much awaited Amazon TV series called "The Grand Tour". For those of you who are too hooked on HBO's "Game of Thrones" you may have not noticed that there was this popular entertainment TV series vaguely based on automobiles called "BBC's Top Gear". After a successful and entertaining run from 2002 to 2015, the 3 stooges of the Motoring-as-entertainment world — Jeremy Clarkson, James May, Richard Hammond and genius director Andy Wilman — de-camped to Amazon to produce "The Grand Tour".

A caravaner's tent?

Contracted to run for 3 years/3 seasons and costing an eye-watering sum — large enough for Jeff Bezos, Amazon CEO and billionaire founder, to comment that such good talent comes at a price — the first episode is due to show in the Fall. Like TG (Top Gear), TGT is based on the comedic yobbish humor of 3 typical English laddies. Having noted that, TGT, will still be about car related adventures, dares, races and the town hall or pub gatherings where petrol heads trade tall tales and rabid jokes. This time TGT's town hall gathering will be in a tent, instead of a ex-WW2 hangar cum studio. The tent will be in a different place/country per episode, with the first being in Jo'burg South Africa.

The end of EU visa free and customs bond free travel

Now, its prime host, Jeremy Clarkson, who is pro-Remain, is a personal friend of the outgoing Tory PM, David Cameron, who led the defeated Remain camp in the recent Brexit Referendum. With Brexit a possibility in a few years time, the 3 TGT hosts and Andy will surely be planning to stage as much of TGT in EU countries while they, and their expert British crew still have passports valid for EU travel. This also means that TGT's considerable gear — cameras, equipment, computers, drones, Land Rover Discovery camera vehicles — can go in and out of EU borders without posting a carnet or customs bond, which, Jeremy wailed, was required of them by the Swiss, Switzerland being a non-member of the EU.

BBC's headaches even without Brexit

Brexit wise, there is still plenty to discuss at the EU about broadcast rights and access, an issue that the new "BBC Top Gear" will have to bear with, regardless if the BBC keeps Chris Evans, keeps Matt LeBlanc from leaving, while incorporating the "Extra Gear" side show hosted by popular and opinionated motoring journalists, Chris Harris and Rory Reid.

And on that bombshell....

So unless you are contemplating on texting the Morgan dealer in Greenhills, Willie Soong for a Jaguar F-type, Marc Soong for your Discovery, Nicky Mariano for the latest Aston Martin, RCJ for a Bentley Mulsanne LWB or Willy Tee Ten for a Silver Wraith (or Lotus Evora or MINI Clubman), there is no rush to order until the UK is officially ejected in 2018. In the meantime, the uncertainty knows no bounds and speculation powers the swings in global capital and currency markets making the UK not quite a stable country to invest in business nowadays. Both Leave and Remain camps must probably rue the day when they proposed that a Referendum echoed that popular line on the Clarkson-May-Hammond Top Gear; "What could possibly go wrong?"