Brexit Complications Reportedly Delay Next Mini

Matt Posky
by Matt Posky

BMW Group has delayed the development of a next-generation Mini Cooper, citing a need to reduce cost and comfortably navigate Britain’s trade relations with the European Union after Brexit.

Considering Europe has had since June of 2016 (when the referendum took place) to figure all this out, it feels silly that the region is still in a panic. Yet that’s reality in which we live. Despite the United Kingdom voting to withdraw from the European Union years ago, the decision received an immense amount of pushback. Negotiations stalled, arrangements went unmade, and the UK eventually voted in a gaggle of Conservatives in the last election — giving them a strong majority in Parliament.

That new political makeup, which includes Prime Minister Boris Johnson, meant Brexit could finally happen. But it doesn’t undo the wasted years that failed to produce a comprehensive trade deal between the UK and EU, or the resulting complications.

While Mini brand sales fell over 4 percent last year to 346,639 cars, the company owes about a third of those deliveries to hatchback sales in Europe. But Cooper models have been chilling on the ULK1 platform since 2014, encouraging parent company BMW to start development on its replacement before the car grew too stale.

Unfortunately, developing a new platform is expensive, requiring an automaker to set aside roughly $1 billion in cash. Mini’s hatchback is an important model, but it’s not a global success. Sales in the United States dwindled to just 8,462 units in 2019, fewer than Europe manages to move in an average month.

Consumers continue to trend into larger vehicles, making the model less appetizing to pursue in the long term. However, with environmental regulations perpetually on the rise and BMW making promises to further electrify the Mini brand, an updated Cooper could also make for a nice compliance vehicle people would actually purchase. It’s an issue BMW still needs time to figure out as it works on a €12 billion ($13.3 billion) restructuring plan slated to wrap by 2023.

To get there, the German company says it must reduce the number of available vehicle configurations and tamp down development costs — the latter of which will be exceptionally difficult to pull off, as automakers collectively scramble to break into the electric vehicle market.

“The lifespan of [the ULK1] platform has been extended,” BMW spokesman Maximilian Schoeberl told Reuters. “For cost reasons and because of Brexit.”

From Reuters:

The Mini is currently built in Oxford and in Born, the Netherlands, and any next generation car would require investments into the production lines of both factories.

BMW will not make large scale investments until there is greater certainty over the outcome of negotiations between Britain and the European Union over a trade deal.

“If tariffs are in the range of zero and 5 percent, the business case would not dramatically change,” BMW Chief Executive Oliver Zipse said last year, referring to Oxford’s status as a production and export hub for the Mini.

But higher tariffs on exports to and from Britain may force BMW to consider shifting more production to the Netherlands.

One silver lining is that BMW’s cost cutting actually seems to be working. In November, it reported a 33 percent improvement in third-quarter earnings (pre-tax). “The efficiency-boosting measures we have implemented are bearing fruit,” said CFO Nicolas Peter, noting that the automaker was performing exceptionally well considering the general state of the automotive sector. That comes after a profit warning which presumed 2019 would be overwhelmingly difficult, suppressing pre-tax profits by an estimated 10 percent due to global trade complications.

Expect an update on Mini’s development status later this year. The United Kingdom will officially be out of the EU on Saturday, entering an 11-month (perhaps more) transitional period where real trade negotiations will hopefully take place.

“The most important thing to say tonight is that this is not an end but a beginning,” Prime Minister Boris Johnson said in a statement on Friday. “This is the moment when the dawn breaks and the curtain goes up on a new act.”

[Image: BMW Group]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Whatnext Whatnext on Feb 02, 2020

    And now China is the rising superpower and the USA is slowly declining after Imperial overreach. It is the Circle of Life.

  • Dal20402 Dal20402 on Feb 03, 2020

    Garbage in, garbage out. Brexit is an intellectually and legally incoherent concept, and confusion is the only possible reaction to it among businesspeople. I feel sorry for all the UK businesses that are going to see everything grind to a halt until the government staff and lawyers on both sides who actually have technical knowledge of trade are able to tune out BoJo's bleatings and figure out how this will actually work. Remember that, while we've known "Brexit" was coming since 2016, we didn't even have a rough idea of what Brexit actually meant until the most recent agreement was reached just three months ago. Now we still have only a rough idea, and it will take a couple of years to develop that into something refined enough for businesses to write contracts around.

  • Lou_BC I've I spent the past few days in what we refer to as "the lower mainland". I see Tesla's everywhere and virtually every other brand of EV. I was in downtown Vancouver along side a Rivian R1T. A Rivian R1S came off as side street and was following it. I saw one other R1S. 18% of new vehicles in BC are EV'S. It tends to match what I saw out my windshield. I only saw 2 fullsized pickups. One was a cool '91 3/4 ton regular cab. I ran across 2 Tacoma's. Not many Jeeps. There were plenty of Porches, Mercedes, and BMW's. I saw 2 Aston Martin DBX707's. It's been fun car watching other than the stress of driving in big city urban traffic. I'd rather dodge 146,000 pound 9 axle logging trucks on one lane roads.
  • IBx1 Never got the appeal of these; it looks like there was a Soviet mandate to create a car with two doors and a roof that could be configured in different ways.
  • CAMeyer Considering how many voters will be voting for Trump because they remember that gas prices were low in 2020–never mind the pandemic—this seems like a wise move.
  • The Oracle Been out on the boat on Lake James (NC) and cooking up some hella good food here with friends at the lake place.
  • ToolGuy Also on to-do list: Read the latest Steve S. fiction work on TTAC (May 20 Junkyard Find)