Quote:
Originally Posted by 1andrew1
Pretty clear that Brexit was one of the factors leading to the closure of Honda Swindon. Like FlyBMI, it is unlikely to be the only reason but it can well be the straw that breaks the camel's back.
David Bailey, an economics professor at Aston University has said “I think we’re seeing a collision between Brexit uncertainty making investment difficult, just as the industry is transforming itself. Honda came to the UK because it offered a launchpad into the single market. There’s a lot of bewilderment in Japan about Brexit because what we offered them has been taken away. We’re not upholding our side of the deal so they don’t need to either. There may have been more of a chance of the UK being a centre of electric vehicle production if we stayed in the single market and if we had a more supportive industrial strategy.”
https://www.theguardian.com/business...-close-in-2021 |
So I have been thinking a bit about why Honda made the decision it did. As I have said before, the choice of where to site a manufacturing plant is driven by cost and ease of doing business. Cost would include cost of labour, synergies/critical mass of existing plant, taxes, closeness to your market and the tariff and non-tariff costs of shipping to your customers and receiving parts from your suppliers. Ease of doing business would be assuring the quality you need in your product, the skills of your workforce, legislation governing your business and, as above, the closeness of your customers and the costs of shipping (tariff and non-tariff barriers to trade)
The Swindon factory was a small plant in the grand scheme of things while, at the same time, there was spare capacity in Japan for manufacturing. Moving the manufacturing to Japan reduces Hondas costs of manufacturing and allows flexibility in the output - this month we will make less Civics and more CR-Vs for example. It does make economic sense to bring together manufacturing under one roof as it can grow your margin.
However, there are some risks... One is disaster planning - having multiple plants is a good idea in case something goes wrong. The second is moving away from a significant market - Europe. However, two things are helping here - one is the cost of moving cars around the world is dropping. The second is a certain EU-Japan trade deal, lowering the tariffs on cars eventually to zero. Again, the margin on a zero tariff car will be higher than one that attracts a 10% tariff.
During the negotiations, France and Germany argued against dropping the tariffs on cars as it would a) compete against EU made cars and b) cause shutdowns of Japanese car manufacturing sites in Europe. The UK and Japan pushed hard for the zero tariffs and got them.
Where does Brexit come in here? There will be a degree of uncertainty, especially related to supply chains and tier 2 supplier costs, as well as the costs of exporting from the UK to the EU if they do occur. At the moment, noone knows, generating a lot of uncertainty. I think the Honda decision had little to do with Brexit but may have been the straw that broke the donkeys back. The decision was economic.
There are of course unintended consequences... If we don't get a good trade deal with Japan, then the following will be the case;
EU gets no Honda factories but cheaper cars
UK gets no Honda factories but more expensive cars
Sorry, bit of a brain dump!