The impact of Brexit upon Ford Dealerships

The impact of Brexit upon Ford Dealerships

Alongside a very positive set of numbers and upbeat report to the markets for the six months to 31 August 2020, (“we did the basics well …reporting an outstanding performance post lockdown”), Robert Forrester, CEO of Vertu Motors also highlighted an interesting real life Brexit issue in his commentary.

Robert commented that “from 1 January 2021 Ford is proposing to amend their invoicing process for vehicles imported into the UK”.

Currently Ford dealers are able to reclaim the VAT on imported vehicles when a vehicle leaves the assembly line postproduction regardless where this may be within the EU. The cost of the vehicle is then included as a trade creditor until the vehicle is sold (this can be subject to a time limitation) using manufacturer funding to support the purchase.

From January 1, this process will cease and dealers will only be able to claim VAT once the vehicle is imported into the UK. The time line from production to importation may be up to several weeks, which means that there will be a considerable time lag for VAT recovery.

The net effect will be that the previous process of VAT recovery, which has advanced cash to dealers (Robert estimates that this may be up to £15m in the case of Vertu Motors), will unravel in the first quarter of 2021 and put strain upon dealers who have not worked this reversal into their cash flow planning.

This VAT issue is unique to Ford dealers and so has no wider implications for the motor trade as such but is an interesting post Brexit consequence and possibly one of many to come.

Whilst Vertu Motors are clearly on top of this issue both from a management perspective and with a good set of results to fall back upon, others may need to look carefully at the impact and plan accordingly. As a rule of thumb, Ford Dealers may have a cash flow reversal of about £750,000 per site (depending upon precise numbers) so the impact could be significant for those who don’t take notice of what Robert has written.

If any retailers would like more information on the impact, or any help with the planning please do not hesitate to contact us on Chris.Cummings@ase-global.com

Or visit our LinkedIn page for more info:https://www.linkedin.com/company/ase-plc/