MUNICH (June 27, 2016) — The United Kingdom's stunning decision to abandon the European Union could slash auto makers' profits by billions of dollars and cut new-vehicle sales by nearly a million units over the next three years, analysts warned as economic uncertainty washed over global financial markets.
The results of the historic vote battered shares of suppliers and dealership groups with significant exposure to the U.K., as well as Fiat Chrysler Automobiles, which has its headquarters in London and could be particularly vulnerable in a European downturn.
France's PSA Group (Peugeot, Renault) indicated it likely would raise sticker prices in response to the falling pound.
"This is not a good day for Europe — and in my view, certainly not for the U.K.," Daimler A.G. CEO Dieter Zetsche said. "Geographically, the country may be an island; politically and economically, it is not."
The U.K., Europe's second-largest automotive market after Germany, accounted for about 20 percent of European sales for Daimler's Mercedes-Benz brand in 2015.
LMC Automotive predicted that the vote to leave would wipe out 120,000 sales in the U.K. this year and about 400,000 in each of the next two years, reducing its forecast over that period by 10 percent.
"Uncertainty will likely hold back investment and hiring decisions, as businesses consider their options and wait for greater clarity, something which is unlikely to come quickly," LMC said in a report June 23.
Analyst firm Evercore ISI cut its U.K. sales forecast through 2017 by 14 percent and said the vote for British exit, known colloquially as Brexit, could affect auto maker earnings by nearly $9 billion in the next two years.
At Jaguar Land Rover, which is based in England's West Midlands, company insiders had said prior to the vote that a victory for the "leave" camp could sap $1.4 billion from its earnings by the end of the decade.
Suppliers whose stocks plunged at least 9 percent Friday include Delphi Automotive, Lear, BorgWarner, Tenneco, Meritor and Dana Holding Corp. Shares of Penske Automotive Group, which generated a third of its 2015 revenue in the U.K., fell 10 percent.