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Brexit and the weak pound

exporting used parts
Autoparts Ltd purchase vehicles and then completely dismantle them prior to export.

With the pound taking a big hit since Brexit, we wanted to know what the impact has been for the auto recycler.

The UK market has been subdued for a while, initially driven by lower metal prices which gave a somewhat refrained feel in the industry. Recently the pound hit a six and a half year low against the Euro so we wanted to know, what’s the impact?

The reduced pound must be a positive for anyone exporting, whether that’s parts or vehicles, but has the effect been significant? We spoke to one of the leading exporters to Russia and Eastern Europe to gauge the feeling. Vladimir Boltach of Autoparts Ltd, who buy vehicles, remove the parts wanted and then export, gave the following insight into not only the UK end but the Russian and Belarus end as well.

Vladimir explained to atfPro, “Depreciation of the pound has arrived in the right time for our business. As we have been experiencing economic downturn in Belarus and Russian market since 2015 it was difficult for us to keep buying vehicles for breaking and used car parts in the UK. Both economies, Russian and Belarus, contracted in 2015 and 2016 as a result of implementation of sanctions to Russia by the US and EU and diminishing prices in oil and gas.

Before the vote on Brexit in June 2016 with a strong pound we were experiencing a problem where number of cars we were buying in the UK was not growing. Strong pound and downturn in our economy did not allow us to grow at a projected pace. Moreover, such conditions pushed us to buy more vehicles for breaking from our suppliers in Europe (weak Euro), Japan and the US to compensate for stagnation in purchases from the UK. Downturn in our economy decreased overall prices on cars in Belarus and Russia. If previously cars were imported from Europe and the US at great numbers to both countries (many damaged cars were imported to Belarus and Russia to be repaired as well), after the economic downturn in the end of 2014 cars started to be re-exported back to Europe and even the UK. The weak Russian and Belarus ruble made both markets very attractive to buy cars from.

For an example, in 2014 in Belarus and Russia, a 2012 BMW X3 (F25) (2 years old) was valued at about £30,000, but the same 2 year old car (a 2014 BMW X3) costs about £15,000 in Belarus and Russia now. Initially such significant depreciation of prices for cars in our markets impacted our purchases from the UK significantly. Consequently, the reduction in overall retail prices for complete new and used cars reduced the prices for new and used parts in Belarus and Russia as well.

However, since the Brexit vote with consequential depreciation of pound we have seen a gradual growth in our purchases. We ship 10 - 14 lorry loads of used parts a month at the moment and are planning to return to the 20 lorry loads we had in 2013-14 by the end of next year. The weak pound will definitely help us to achieve that and it is a great opportunity for UK businesses to grow exports now. Overall outlook for our exports from the UK is very positive. We are always looking to increase the number of suppliers we have in the UK and can offer the most comfortable way of cooperation for companies looking to export. The Russian economy is projected to grow slightly next year and a steady Russian Ruble has brought confidence back to our clients. I would say export opportunities are not to be missed as the demand locally may suffer as a result of raising inflation in the UK.”

I’m sure you can see from Valdimir’s comments that it isn’t only the price at our end but also what’s going on in the market you plan to export to. If you’re looking to increase sales, then the export market is worth a look. I’m sure Vladimir would be pleased to talk to you about the potential. If you want to contact him, you can email him here or call him on 07817 449359.

Next month we shall look at the effect on machinery and equipment suppliers.

November 2016

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