BEIJING: Executives at Asian automakers with factories in Britain, largely set up to export to the European Union, say they could slow investments in Britain or even put them on ice for now, after the country voted to leave the 28-nation bloc.
Automakers, including Toyota and Nissan , had been among the manufacturers that have warned that a period of uncertainty would follow a Brexit vote, as trade and labor deals with Europe are renegotiated. Most on Friday estimated it could take around two years.
Toyota and Nissan had said in the run-up to the vote that continued membership of the European Union was preferable for their operations: a vote to leave would create new challenges for an industry that employs some 800,000 people in Britain.
Even so, Sunderland in northern England, where Nissan has its operations, was among the constituencies that surprised pundits by the extent to which voters supported an exit.
Shares in all Asian automakers tumbled.
"We don't have any choice but to be more cautious with our investment decisions, including moves like whether to produce a new or significantly redesigned vehicle model in the UK," said one official at a global automaker with manufacturing capacity in Britain, speaking on condition of anonymity.
Tata Motors' Jaguar Land Rover (JLR) is Britain's largest carmaker, followed by Nissan, which has been in Britain for three decades and makes 475,000 cars a year in the country, most of them for export inside the European Union and beyond.
According to sources familiar with the company, JLR has estimated its annual profit could be cut by one billion pounds (US$1.47 billion) by the end of the decade as a result of Brexit. It said on Friday it remained committed to Europe.
But the carmaker also warned on Friday of a "significant negotiating period" to follow the vote.
"The big question for automakers . . . is what kind of trade deals with the EU would be negotiated. That is the big unknown," a second executive at a global automaker said.
TARIFF-FREE EXPORTS
Exports from Britain to the European Union are free of tariffs and duties. Toyota has said duties under new trading deals could be as much as 10 percent, hitting either prices or margins, and denting sales.
Toyota produced about 190,000 cars in Britain last year. Of that, 75 percent went to the European Union. Only 10 percent was shipped and sold within Britain.
South Korea's auto association said it was worried a departure could revive a 10-percent tariff on exports of passenger vehicles to UK, unless a separate deal is negotiated.
"This could inevitably undermine the price competitiveness of South Korean automakers in UK, as opposed to Japanese and German rivals which have production bases there," said Kim Tae-nyen, vice president at the Korea Automobile Manufacturers Association (KAMA).
At least one country saw a silver lining in Brexit. India's auto industry body, the Society of Indian Automobile Manufacturers, said it could presage a better trade deal for India with Britain. India has made several futile attempts to enter into a free trade agreement with the European Union.
But others raised the prospect of moving Britain-based manufacturing capacity to Europe.
Toyota said in a statement that it would analyse the impact of the vote on its UK operations. Nissan did not comment, though chief executive Carlos Ghosn said last week the company would question its UK position in the event of Brexit.
"No one is going to rush out and do anything tomorrow, but rather than revamp a plant in the UK to produce a new model, they might revamp a plant somewhere else," CLSA analyst Chris Richter said. "Down the line, it could lead to job losses."
Aside from Toyota, Tata and Nissan, others manufacturing in Britain include BMW , GM and Honda .
Honda produces around 140,000 vehicles per year, including the CR-V crossover SUV and Civic sedan at its plant in Swindon. Half of its production is exported to the EU.
For now, officials said efforts would turn to lobbying hard for better trade deals.
"Obviously, trading deals to be worked out subsequently could be a worse situation than we have now, or better, or all the same," said the second executive. "We don’t know, and that’s the problem."
(Additional reporting by Naomi Tajitsu in TOKYO, Aditi Shah in NEW DELHI and Hyunjoo Jin in SEOUL. Editing by Bill Tarrant.)