Brexit: Car Prices Soar Since EU Vote

Car makers have warned that a hard Brexit may see new tariffs of £1,500 on cars from Europe but the prices of Britain’s most popular cars have already rocketed by about £2,000 since last year’s Brexit referendum.

The consumer magazine “Which?” has studied the prices of new cars in the UK over the past year and found they have already risen by up to 21.8%, the average hike for a Vauxhall Corsa.

In the year to July 2017 the average price of the top-selling Ford Fiesta (left)  rose a staggering £1,874 or 17.8% to £12,427 while the next most popular vehicle, the Corsa went up £2,096 (21.8%) and the number three Ford Focus rose £2,039 (14.8%).

The remarkable rises in car prices were fuelled by the shrinking of the pound after last July’s Brexit vote and the price hikes have far outstripped inflation, which has risen because of the weaker buying power of the pound but has reached only 2.9%.

Car pricing expert Pat Hoy said the eye-watering rises in car prices included efforts by car makers and dealers to unwind the large discounts they had offered in recent years as they may have embarked on a deliberate strategy to get consumers ready for a new era of even higher prices after Brexit in March 2019.

Lack of Clarity

“By 2019, import tariffs might be in place on new cars and interest rates could be on the rise,” he said. “So if the industry can get the market used to more realistic pricing between now and then, dealers will be better placed to withstand any Brexit shocks.”

“Unless new car registrations fall to unacceptable levels for manufacturers, consumers might just have to get used to higher prices. And even with a smooth Brexit, some dealers may still claim a Brexit effect to try to explain away offering less discount.”

The Society of Motor Manufacturers and Traders, whose members employ about 750,000 people in the UK, has warned that the continuing lack of clarity from the British Government about what sort of trade deal it hopes to achieve after Brexit risks “permanent damage“ and “death by a thousand cuts” in investment with the threat of £1,500 in new tariffs on family cars from Europe, which dominate British imports.

Prime Minister Theresa May announced in Florence last week that she hoped to agree a “status quo” transition period of about two years after Brexit but carmakers say they are still desperate to know what will follow any such transition period.

In the three months after the June 2016 Brexit referendum the pound fell by 18% against the US dollar and 15% against the Euro. It fell further before a recent recovery. Which? noted that 86% of new cars sold in the UK are imported models, with almost 90% of imported cars and 76% of imported parts and accessories coming from Europe. But even cars labelled as UK-manufactured have an average of only 30% UK-made components.

Weak £ = High Prices

Which? used figures from the car prices database PHA Autodata to analyse the prices that buyers have been paying for Britain’s 10 bestselling new cars, comparing prices at the time of the Brexit referendum with those a year later.

While the top three sellers and the fifth-ranked Nissan Qashqai soared by double-digit percentage rises there were below-inflation rises for two models, the Volkswagen Golf (1.3%) and the Mercedes-Benz C-class (2.5%) .

When asked to explain the price rises since the Brexit vote, Ford pointed to the fall of the pound. “Our UK vehicle sales in sterling have to cover majority production costs in Euros,” the company said. “Towards the end of last year we put a value on the impact of weaker sterling on European operations.”

Ford said a combination of “a softer industry and exchange” caused $200m (£153m) of lost revenue in 2016, and that the slump continued into 2017. Vauxhall said its rises in car prices had “varied by model depending on country of origin.” Nissan said the Qashqai price was for a newly launched model “however the Qashqai price increase is slightly below the category increase over the last 12 months, even with the transition to the new Qashqai.”

 

2016 v 2017 average starting prices for the top 10 new car models in the UK

Price Aug 2016   Price July 2017          % change

1. Ford Fiesta*                     £10,553                  £12,427               17.8%
2. Vauxhall Corsa                   £9,602                  £11,698               21.8%
3. Ford Focus                       £13,774                  £15,813               14.8%
4. Volkswagen Golf                £16,180                  £16,394                 1.3%
5. Nissan Qashqai                 £17,140                  £19,295               12.6%
6. Vauxhall Astra GTC           £19,010                   £20,082                 5.6%
7. Volkswagen Polo GTI         £17,648                   £18,190                 3.1%
8. Mini                                 £13,426                   £13,883                 3.4%
9. Mercedes-Benz C-class      £25,869                    £26,523                 2.5%
10. Audi A3                            £18,029                   £18,688                 3.7%

 

* Fiesta price is from Sept 2016 to reflect change of specification. Source: PHA Autodata/SMMT

 

by Peter Wilson

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