BMW MINI: Big Decisions Under the BREXIT Cloud

The Characteristics and current situation of the industry

The automobile industry is different from other common industries. The automobile industry is basically an assembly industry, so parts are delivered from all parts of the world. The country of origin of each part, the place where it is assembled, and the nationality of the company can all be different. BMW Mini is the case. Mini itself is considered a British brand, but BMW is a German company, and BMW's new technology development is all done in Germany. BMW is manufactured in Germany, Brazil, China, India, South Africa, the United Kingdom and the United States, and its biggest market is China. BMW is now at a critical crossroads. Britain's exit from the EU has already been decided after announcing that it will produce all BMW models as an electric vehicle option. The main assembly line for the Mini was in Cowley, England. However, the problem is that 90% of the parts came from Continental Europe. Parts used in the production of the Mini crossed country borders several times before they were installed in the car. If Britain actually leaves the EU, the company will lose its profits due to the lack of tariff benefits, but the time for these parts to be transported will also be much longer, resulting in huge losses in the parts supply chain. If the parts supply process becomes longer or it becomes difficult to predict the expected arrival date of the parts, more trucks and drivers will be needed. In addition, the size of warehouses should be increased to prevent disruption of parts supply.

The Alternative Options for BMW Mini

Building a New Car Plant in Europe

A new car plant could cost $1 billion if they build a new car plant in Europe. For example, Slovakia already hosted factories by major carmakers such as Volkswagen, Kia Motor Corporation, Peugeot, and Citroën, along with many first-tier automotive suppliers. In 2013, BMW was already exploring opportunities for new car production capacity in Slovakia.

Localizing Supply Chains

Suppliers would need to invest in new facilities in the UK if they localize supply chains. These new operations would achieve fewer scale economies and be less flexible than integrated European operations. Industry analyst Lawrence argued that,

"you could look to bring components into the UK to manufacture, so it could have a positive impact. But the challenge is if you are exporting 80 per cent of the vehicles—like Nissan are or Vauxhall are from Ellesmere Port—you have to question the benefits of that if there will be tariffs on exports."

The Mini’s Main Assembly Line in Cowley

This is already Mini's main factory, and if BMW creates Mini's electric car line here, BMW can save the identity of the British brand Mini. However, in the event of Brexit, it is unclear whether it is an economic place compared to other places.

The Other Options

BMW could build a plant in the Netherlands, where their supplier VDL is located, or it could set up a plant in Germany where their lab is located, or it could even set up a factory in China.

Eventually, Britain is the answer

The power of the brand itself is very important in marketing. Mini has not lost its brand identity as a British car even after the German company BMW took over it. Production of electric vehicles is one of the major turning points for the future. This important start should always be made where the brand image is located. Brexit is a later matter. It's something to think about later, even if Brexit causes disruptions in the supply chain and damages it. It may be criticized by many shareholders, but in the long run, it will benefit the company. However, it is irresponsible to produce electric cars first in the UK without any countermeasures. Therefore, once BMW starts making cars in the UK, BMW will have to plan to build a plant in the Netherlands, where BMW's supplier, VDL, is located. Because Brexit can occur at a very minor level, constructing a plant in the Netherlands will minimize the risk. Already, BMW has been in a partnership with VDL, and if it sets up a factory in the Netherlands, it will be able to work together to maintain a mutually beneficial relationship.

 

 

 

 

Reference

Meyer, K. & Mark, Ken. 2019. BMW Mini: Big Decisions Under the Brexit Cloud. Harvard Business Review, 39.

Ruddick, G. & Oltermann, P. 2017. A Mini Part’s Incredible Journey Shows How Brexit Will Hit the UK Car Industry. The Guardian.