Will British car prices here alter as result of the UK’s determination to pull out of the EU? Jaguar Land Rover says anything is possible, but says the F-Pace won’t be a test case.
AN immediate effect of Brexit has not persuaded the biggest distributor of British vehicles here to reprice its most important car in years just days from launch.
The United Kingdom’s decision to pull from the European Union instantly reduced the value of British sterling by as much as 10 percent against major currencies, a 31-year low and its biggest fall in history. It had yet to recover at time of writing.
However, there’s no likelihood any effect of a weaker pound passing onto the F-Pace, a sports utility on sale from this Friday (July 1) that Jaguar considers to be a key model in this SUV-fixated market.
Motorcorp Distributors’-owned Jaguar and Land Rover New Zealand, the biggest importer of new British cars here with 1300 registrations in 2015, says a car that spans from $95,000 to $165,000 is already sharply priced, so there’s no need for revision.
Also fueling a determination to hold firm on the sticker is uncertainty about the long-term impact of the UK’s EU pull-out, general manager Steve Kenchington said.
“It’s potentially a blip … and, at the moment, there’s an element of wings and roundabouts. It could move back up as quickly as it has come down. I think it’s too early for us to make assumptions. We’ve just got to let the dust settle.
“We don’t know whether it will go anywhere and we also feel that our pricing is incredibly sharp in terms of where it (F-Pace) is positioned.”
While a cheaper pound conceivably helps UK car manufacturing operations’ export markets, any gains from this might be offset because the imported components most use will increase in price, he points out.
“About 40 percent of the parts come out of Europe so there could even be price increases. We just don’t know one way or the other, yet.”
That scenario has already been considered by overseas commentators who point out that premium makers sell with relatively high margins, so some hit on parts sourcing costs might be very absorbable.
Also lurking in the background, though, is a concern the British ca industry – which built 1.69 million vehicles in 2015 – might also be hit by a return of a 10 percent tariff.
Kenchington says the situation simply is far from clear, but if the pound remains depressed, he agrees, then JLR here will have to address this market’s pricing.
“If it remains in the long term then we would certainly have to review it, without a doubt. But in the short to medium future we will stay where we are.”
Motorcorp buys JLR product in New Zealand dollars, he explains, and while the rate is dictated by the factory, the local benefit is that “we don’t get gains or losses. The factory absorbs that and it’s their risk, not ours.
“From order to arrival in NZ can take anything up to five months so anything that does happen will take some time to happen. But we don’t face the risk, which is probably the right thing – it certainly has been for the past few years.”
He agrees that a depreciating pound might aid the parallel import of Jaguars, a particular issue here, but says if that proves to be the case it will give Motorcorp a reason to negotiate comparable factory pricing to meet the threat, as happened when the independents preiously tried to uncercut the official representatives.
“We’re very aware of the import issue and we also know that Jaguar is much desirable now. Parallel importing has been an issue for Jaguar in the past … it’s hard for us to say what the impact is going to be, but if there is an impact then it gives us a case to try and push for pricing reductions.
“But we’ve got to wait and see.”
One positive of the pound’s dive, which occurred within hours of the final results of the historic 52 to 48 split in favour of Britain's independence might be availability of additional stock, should F-Pace domestic demand fall away elsewhere.
“Production is at capacity, F-Pace has been incredibly successful already and, because we are one of the last in the world to launch that vehicle a lot of production allocation has already been committed.
“For us, production is tougher than what we will have hoped? Will it free up production for NZ? Quite possibly, and based on the inquiry we have already had we would welcome some more cars.
“Time will tell. They certainly haven’t rung us to say that there are any more available. Any diminished sales will probably going to come out of the EU. I don’t know about the UK … you might find that people there want to support the brand more, because it is local.”
This isn’t simply a JLR issue. National distributors for Aston Martin, McLaren, MINI, Morgan and Rolls-Royce will also be watching the situation unfold. NZ also takes British-built Nissan and Toyota product. Holden will soon join this bunch with the new Astra, arriving later this year. Those brands have not yet offered comment.
The UK car industry was again a split and, in the lead-up to the referendum, had warned that apart from the likely impact on the UK’s currency, it was worried about the effect it might have on trading relationships between the UK and the remainder of the EU.
Nonetheless, JLR owner Tata Motors wasted no time in assuring that in the here and now, it is just business as usual.
"We are a British business with a strong manufacturing base in this country, we call Britain home and we remain committed to all our manufacturing sites and investment decisions," it said in a statement.
"We respect the views of the British people and in line with all other businesses, Jaguar Land Rover will manage the long-term impact and implications of this decision: nothing will change for us, or the automotive industry, overnight.
"Europe is a key strategic market for our business, comprising 20 percent of global sales, and we remain absolutely committed to our customers in the EU.”
It has expressed hope that negotiations between the UK government and the EU “will continue to recognise the importance of car manufacturing to the UK and European economies.”
Kenchington says that the referendum result came as a personal shock. “I was in England just a month ago and of all the people I spoke to about this, none believed it would happen. So, yeah, it came as a huge personal surprise.”