A report in the Financial Times today suggests there are ‘secret’ plans afoot in Nissan to pull out of the EU, retrench to Brexit-bastion Sunderland and convince UK car buyers to buy their product. The reward: a 20% share of the UK car market.
For Nissan, if the FT report proves correct, it means the Japanese automaker is banking on a patriotic surge of demand for their brand. And to prove their Brexit credentials, the FT goes on to report that Nissan plan to close their manufacturing plants in France and Spain.
For Nissan, the stakes must be extremely high. The Sunderland plant represents the single greatest investment in any of the brand’s plants outside of Japan. For Prime Minister Boris Johnson, the stakes are equally high; any scaling back on jobs at the Sunderland plant would represent a blow to his Brexit credentials. Therefore, it likely that Nissan executives are under significant political pressure to keep the Sunderland plant operating at full capacity. In many ways, it could become a form of 21st Century War Bond!
But ultimately it is the maths that matter. Here are some of the main considerations for Nissan executives and those that need to make the Sunderland plant a continued success.
More investment – it will be expensive to drive the type of marketing campaigns to whip up sufficient demand. Unless Nissan launches a Tesla-style market innovation produced at the Sunderland facility, they will need to rely on paid search and broadcast campaigns to get their message out to the mass market. It’s not a question of millions of Pounds, it’s a question of hundreds of million or more!
Discount incentives – even where consumers hear the Nissan marketing message, convincing them to buy is another matter. In 2018 and 2019, Nissan lost market share to its rivals. So whatever the brand was doing over the course of the last 2 years, it wasn’t working. Nissan must not only stop market share decline, it must reverse it massively. If it does this by price discounting, this will seriously undermine revenue and cash-flow and surely, there will be limited patience in Japan for a long-term financial drain for the benefit of just one market.
Consumer taste – even with the best will in the world, even if 100% of those that voted for Brexit purchased a Nissan out of some sort of patriotic duty, would they? And would they really want to drive the same car as their neighbours, work colleague, parents-in-law or even sporting rivals? The simple answer is probably not. The UK is not Tito’s Yugoslavia; even the most ardant Brexit supporters will want a little diversity.
Of course, the FT report is most likely a ruse. Nissan is probably directing their fire at the Tory-led Government rather than the EU. Without saying as much, they must surely know the ask is too great and costs even more so. In response, they must ask if they believe the Tory Government is fully prepared to make Sunderland the Dunkirk of the 2020s? Will Prime Minister Johnson do whatever it takes to keep Sunderland humming? Under a no-deal Brexit, will they revert to subsidising Nissan purchases and enacting legislation to price non-UK cars out of competition with Nissan?
Ultimately, the costs seem insurmountable for both Nissan and the UK Treasury. It is likely in the long-term that either the UK agrees to free-trade terms that are favourable to free trade. If not, employees at Nissan Sunderland must prepare for the long-term consequences.