Friday, June 24, 2016

UPDATED: What Brexit means for the motorcycle business

The results of the 'Brexit' vote are in, and the UK will now soon begin the process of leaving the European Union. I'm surprised -- not because of pre-referendum polls, which were too close to call but because the bookmaker Ladbrokes was offering terrific odds for 'Leave' bets just a day before the vote. It was a rare example of a vote that defied the bookmaker's odds.

The vote has huge implications for Britain and the future of Europe -- the thing is, at this moment, it's hard to know what the implications are. But there will be short term ramifications, and they'll influence the motorcycle industry in a few ways.

The British Pound immediately fell relative to the Euro (-5%) the Dollar (-9%) and the Yen (-11%). It will rebound but it is likely that the pound will remain depressed for some time. That should be good for British exports and bad for British imports.

Triumph bosses were probably conflicted as they watched a historic drop in the British Pound overnight. Triumphs assembled in Hinckley will become more affordable in export markets. But triples like this one are assembled in Thailand. The Pound fell 8% against the Baht making the decision to offshore that production a lot less attractive.
A lot of Triumph bikes are now made in Thailand, and overnight the Pound fell nearly 8% relative to the Thai Baht, making the decision to assemble bikes there a lot less attractive.

In spite of that, Triumph motorcycles should probably increase market share in the UK, because British importers will be paying a lot more for Hondas and Harleys, for example.

Moving in the opposite direction, the price of new Triumphs could fall here in the U.S.

British motorcyclists ride in Europe a lot. In the short term, that just got more expensive. Over the long term, if Brexit means a return to travel carnets for vehicles, insurance hassles, and the need for visas... well, British riders will have a little less incentive to seek out those sunny Spanish roads or attend a cacophonous Italian MotoGP round.

The Isle of Man, which didn't even have a say in Brexit, pegs its currency to the Pound; it just got a little more affordable for travelers to attend the TT, although it may get a lot more complicated for the many racers who currently travel to the Isle of Man from the Continent.

I noticed that David Emmett, the Brit who operates the excellent Motomatters blog from a home in Holland said on Facebook that he'll apply for Dutch citizenship. Last but not least, I just got a pay cut for my Classic Bike column, because I'm paid for that one in Pounds.

Brexit also has larger implications for Europe. The EU is weaker without the UK; it's too early to tell what that means for companies like Ducati, KTM, and BMW which rely heavily on export sales. In the short term the Euro's also fallen against the dollar, which should be good for Americans who like to ride new European bikes, but it will be bad for Harley-Davidson which has been counting on increasing foreign sales to offset aging American buyers. (H-D doesn't break out International sales by country in its annual report, but I think it's safe to say the UK is one of, if not the biggest, foreign markets for The Motor Co. Harleys are popular in the UK, and Harley's had a strong dealer presence there for a century.)

In an increasingly interconnected global economy, it's harder and harder to say where anything's made any more. But at least in the UK, Brexit was a vote for borders. (Well, it was really a vote against foreigners.) It's also harder to predict exactly how it will shake out for any business.

I'm certain of this, though: it will impact the motorcycle business, and motorcyclists who live in the the UK and the rest of Europe...


Roger Willis, a long time observer of the UK motorcycle industry notes: Two-thirds of Triumph's production is now in Thailand including all the Bonnevilles for sale worldwide. The ones coming back to the UK are, I believe, dollar-denominated imports. The prime reason for a Thai manufacturing location, besides cheaper labour, is to take advantage of ASEAN group FTAs with the US and Antipodes. PS Harley's UK market is much smaller than France or Germany

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