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4-Traders Homepage  >  Equities  >  Tokyo  >  Nissan Motor Co Ltd    7201   JP3672400003

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UK car output hits 17-year high but investment tumbles

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01/26/2017 | 12:18pm CEST
A traffic jam is seen as cars head towards the approach tunnel of Heathrow Airport, west London

British car production reached a 17-year high last year, but the country's vote to leave the European Union contributed to a roughly 33 percent drop in investment in the sector, a car industry body said on Thursday.

Carmakers had lobbied hard against Brexit, saying that it could result in the imposition of export tariffs that would make UK plants uncompetitive.

Britain built 1.72 million vehicles in 2016, the Society of Motor Manufacturers and Traders (SMMT) said, adding that the annual increase of 8.5 percent lifted output to its highest since 1999 and the third-highest since the 1970s.

However, the SMMT said that investment in the sector, which tends to make decisions about future production two to three years before a model rolls off the production line, fell by a third to 1.66 billion pounds.

"We do see companies at least delaying decisions until there is greater certainty," SMMT Chief Executive Mike Hawes told reporters.

Among the British car industry's concerns is the requirement of many free-trade deals between countries and blocs for more than 50 percent of components in a car to be made locally. Britain currently averages 41 percent.

If Britain fails to secure a preferential deal with the European Union during the two-year divorce talks due to begin by the end of March, cars made in Britain could become subject to a 10 percent World Trade Organisation tariff on exports.

"It would be very hard to overcome that level of additional cost, given that plants operate on wafer-thin margins," Hawes said, adding that carmakers generally make only a 2-4 percent return on investment.

"We want trade deals, but they must be the right deals, not rushed deals. Failure to do so could damage UK automotive manufacturing beyond repair."

Prime Minister Theresa May said last week Britain would leave the EU single market, which guarantees unfettered trade on the continent, but suggested that the car industry may be able to retain elements of free trade under a bespoke Brexit deal.

Japanese carmaker Nissan (>> Nissan Motor Co Ltd) said in October that it would build two new models at its Sunderland plant in North East England.

A source told Reuters that the decision had been made after a government pledge for extra support to counter any loss of competitiveness caused by Britain leaving the EU, though a spokesman for the Prime Minister said that no explicit promises had been made on compensation for tariffs.

(Editing by David Goodman)

By Costas Pitas

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Financials ( JPY)
Sales 2017 11 619 970 M
EBIT 2017 700 000 M
Net income 2017 582 837 M
Debt 2017 5 612 178 M
Yield 2017 4,54%
P/E ratio 2017 7,19
P/E ratio 2018 6,79
EV / Sales 2017 0,87x
EV / Sales 2018 0,83x
Capitalization 4 471 848 M
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Mean consensus HOLD
Number of Analysts 22
Average target price 1 338  JPY
Spread / Average Target 26%
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Hiroto Saikawa Vice Chairman, President & Chief Executive Officer
Carlos Ghosn Bichara Chairman
Joseph G. Peter CFO, Head-Investor Relations & Accounting
Celso Guiotoko Chief Information Officer
Takao Asami Senior Managing Executive Officer & Head-Research
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