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Carmakers face up to political risks

Adel Murad
Political risks facing carmakers in the next decade could exceed environmental pressures and may lead to drastic strategic changes in the industry. There are several examples of future political risks faced by car companies in the immediate future.
In Britain, exit from the EU poses grave risks to car companies operating from the UK. Some executives have been vocal about this risk, calling on the UK government to give assurances it cannot give at this stage. Aston Martin’s CEO Andy Palmer called for more clarity on “Brexit” while Didier Leroy, VP of Toyota, said recently: “We cannot stay in this kind of fog when we don’t know what will be the output of the negotiations.” Toyota has a plant in Britain that employs 3,000 people and intends to invest $317 million when the “fog” clears.
Meanwhile, Dieter Zetsche, Daimler’s CEO, said from Stuttgart that the policies of US President Trump are a risk for German carmakers. Trump is championing the protection of US carmakers and has criticized import of German cars to the US as “unfair trade.”
VW’s Seat is preparing contingency plans to move its headquarters from Catalonia if the political standoff with Madrid gets worse. This will affect 14,000 workers in Martorell, near Barcelona. Development of a new Seat SUV has been put on hold.
China, too, is imposing restrictions on car imports in efforts to support its emerging car industry. One of the measures taken by China is imposing escalating quotas for electric cars starting in 2019. This has compelled companies to invest heavily in an expensive technical leap with slim profit margins. Large profit margins in the Chinese markets are a thing of the past.
There are other risks facing the industry including the need to cut costs; demands for wage rises of up to 6 percent by workers’ unions; the danger of investing in the wrong technology and the huge investment needed to develop electric vehicles and autonomous driving.
Leaders of car companies are to be commended for chartering a viable future in these turbulent times.
• Adel Murad is a senior motoring and business journalist, based in London.
Email: [email protected]

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