25 March, 2020

Brexit may help UK carmakers cope with coronavirus shutdowns

Vehicle manufacturers with plants in the UK may be best placed to ride out the current production shutdowns caused by the coronavirus (COVID-19), thanks to their Brexit contingency planning.

In 2019, carmakers in the country started drafting up plans for a no-deal Brexit, where parts supplies would be delayed in customs and tariffs would be added to imports and exports. These actions would help mitigate such problems and keep manufacturing in the country running smoothly.

Now, with virtually all UK-based automotive companies ceasing production of vehicles as sales around the world drop dramatically and staff safety becomes a priority, these contingency plans may help the UK’s car industry get back on its feet quickly once it is safe to do so.

Supply chain

Despite closing plants, carmakers will continue to receive supplies of components from overseas. As China slowly starts to return to normal following the COVID-19 outbreak there, the manufacturing supply chain will resume and shipments sent several weeks ago continue to arrive at closed facilities.

Ships from Japan and China, key sources of parts, take up to six weeks to reach the UK. However, as most carmakers operate a just-in-time delivery system, where components are fitted to cars within hours of arriving on site, many do not have the space to store all of the parts that are set to arrive at closed plants in the next month and a half.

Businesses had been planning to stockpile components in the event of customs delays, and are now enacting policies such as warehouse rental and clearing space in their plants, as well as ensuring their organisational systems are up to scratch. Hence, they are aware of what supplies they may still require when manufacturing slowly returns to normal.

The Financial Times reports that Nissan is planning to store parts on arrival in the Port of Tyne, while it is also leasing additional space near its Sunderland car plant. Parts from Asia destined for BMW’s Mini plant in Oxford will be held in Germany.

Better position

European plants will likely look to take similar action in the coming weeks as supplies build-up at shuttered plants. However, it can take time to source storage facilities, or secure car parks and other land areas to hold trailers full of parts. In this effort, the UK is already well advanced and may be able to take advantage, with manufacturing getting back to normal quicker than the rest of the continent.

Manufacturers such as Mini, Jaguar Land Rover (JLR) and Honda have already had the experience of bringing annual shutdowns forward, doing so last April to cope with the planned Brexit deadline of 29 March 2019. Other carmakers could also look to keep plants open during the summer to catch up following their reopening.

This may even help with future Brexit negotiations when they resume following the COVID-19 era. Should the UK be in an advanced position to supply Europe with components and vehicles, the Government may point to this as a reason to keep free-trade open between the country and the bloc, signalling the importance of British manufacturing in a post-corcoronavirus economy.