Brexit Complications Reportedly Delay Next Mini
BMW Group has delayed the development of a next-generation Mini Cooper, citing a need to reduce cost and comfortably navigate Britain’s trade relations with the European Union after Brexit.
Considering Europe has had since June of 2016 (when the referendum took place) to figure all this out, it feels silly that the region is still in a panic. Yet that’s reality in which we live. Despite the United Kingdom voting to withdraw from the European Union years ago, the decision received an immense amount of pushback. Negotiations stalled, arrangements went unmade, and the UK eventually voted in a gaggle of Conservatives in the last election — giving them a strong majority in Parliament.
That new political makeup, which includes Prime Minister Boris Johnson, meant Brexit could finally happen. But it doesn’t undo the wasted years that failed to produce a comprehensive trade deal between the UK and EU, or the resulting complications.
While Mini brand sales fell over 4 percent last year to 346,639 cars, the company owes about a third of those deliveries to hatchback sales in Europe. But Cooper models have been chilling on the ULK1 platform since 2014, encouraging parent company BMW to start development on its replacement before the car grew too stale.
Unfortunately, developing a new platform is expensive, requiring an automaker to set aside roughly $1 billion in cash. Mini’s hatchback is an important model, but it’s not a global success. Sales in the United States dwindled to just 8,462 units in 2019, fewer than Europe manages to move in an average month.
Consumers continue to trend into larger vehicles, making the model less appetizing to pursue in the long term. However, with environmental regulations perpetually on the rise and BMW making promises to further electrify the Mini brand, an updated Cooper could also make for a nice compliance vehicle people would actually purchase. It’s an issue BMW still needs time to figure out as it works on a €12 billion ($13.3 billion) restructuring plan slated to wrap by 2023.
To get there, the German company says it must reduce the number of available vehicle configurations and tamp down development costs — the latter of which will be exceptionally difficult to pull off, as automakers collectively scramble to break into the electric vehicle market.
“The lifespan of [the ULK1] platform has been extended,” BMW spokesman Maximilian Schoeberl told Reuters. “For cost reasons and because of Brexit.”
The Mini is currently built in Oxford and in Born, the Netherlands, and any next generation car would require investments into the production lines of both factories.
BMW will not make large scale investments until there is greater certainty over the outcome of negotiations between Britain and the European Union over a trade deal.
“If tariffs are in the range of zero and 5 percent, the business case would not dramatically change,” BMW Chief Executive Oliver Zipse said last year, referring to Oxford’s status as a production and export hub for the Mini.
But higher tariffs on exports to and from Britain may force BMW to consider shifting more production to the Netherlands.
One silver lining is that BMW’s cost cutting actually seems to be working. In November, it reported a 33 percent improvement in third-quarter earnings (pre-tax). “The efficiency-boosting measures we have implemented are bearing fruit,” said CFO Nicolas Peter, noting that the automaker was performing exceptionally well considering the general state of the automotive sector. That comes after a profit warning which presumed 2019 would be overwhelmingly difficult, suppressing pre-tax profits by an estimated 10 percent due to global trade complications.
Expect an update on Mini’s development status later this year. The United Kingdom will officially be out of the EU on Saturday, entering an 11-month (perhaps more) transitional period where real trade negotiations will hopefully take place.
“The most important thing to say tonight is that this is not an end but a beginning,” Prime Minister Boris Johnson said in a statement on Friday. “This is the moment when the dawn breaks and the curtain goes up on a new act.”
[Image: BMW Group]