MG's planned mainland Europe sales start in doubt after UK's vote to quit EU

MG Motor has struggled for years to convince UK buyers to take a chance on the Chinese-owned brand. Now it has a new problem: Britain's exit from Europe. Brexit could hit MG's already long-delayed plan to expand sales into mainland Europe, which was scheduled for 2018 - until Britain voted to leave the EU in June.

"The Brexit vote has thrown all immediate plans into doubt until a new trade agreement with Europe is negotiated,” said Matthew Cheyne, MG UK's sales and marketing director. Although the SAIC Motor-owned company imports its cars from China, MG does some assembly on many of the vehicles at its plant in Longbridge, central England. That means MG's launch into mainland Europe would be from the UK.

A few weeks before Britain voted to quit the EU, MG had launched the first of two planned SUVs and was hopeful that its refreshed lineup would attract younger customers to boost its sales, which last year reached 3,152 vehicles. "We need to entice new customers. The current demographic is 55-plus," Cheyne said. "The SUV is capturing the imagination of younger buyers."

The MG GS compact SUV has been priced to undercut the segment-leading Nissan Qashqai by about 3,550 pounds ($4,666) in the UK as the automaker looks to build on the success of the MG3 subcompact hatchback.

For now, those two models make up MG's UK range. Sales of the MG6 midsize hatchback, which marked the brand’s return to the mainstream car market in 2011, were discontinued in June following weak demand.

The range, however, is scheduled to expand to three cars at the end of next year when the automaker launches a subcompact SUV previewed by the MG Icon concept in 2012. That car featured a provocative design, suggesting it would be a rival to the Nissan Juke, but the production version will be less brash. "It’s more restrained than the Juke but it will still go after the younger end of the market," said SAIC's chief advanced designer, Carl Gotham.

Cheyne predicts that by 2018 combined annual sales of the three models will reach 10,000 units, a gain of more than 200 percent on 2015 sales.

11th largest automaker

The brand's ability to launch models into Europe's hottest segments ahead of bigger local rivals is a benefit of being part of SAIC, the world’s 11th largest auto manufacturer based on first-quarter sales, according to figures from market researcher JATO Dynamics. SAIC acquired MG in 2007 after taking over Nanjing Automobile, which bought the bankrupt UK automaker MG Rover in 2005.

Since then SAIC has leveraged its successful partnership with General Motors in China to co-develop a range of small gasoline engines with the U.S automaker for its own brands. The GS features the first of these powerplants seen in European models, a 1.5-liter gasoline turbo that's closely related to the 1.4-liter turbo offered in the Opel/Vauxhall Astra. The production version of the Icon subcompact SUV is expected to have smaller engines from the same family, including a three-cylinder 1.0-liter, while the GS also debuts a new dual-clutch transmission developed with GM.

Despite its fresh lineup and modern powertrains, MG remains disadvantaged in Europe because it doesn't offer a diesel that complies with Euro 6 regulations. That leaves the gasoline-only GS to fight for customers in a segment that is three-quarters diesel across Europe, according to data from analysts LMC Automotive. "They’ll really need a diesel," LMC powertrain analyst Al Bedwell said. MG countered that by saying the GS will be aimed at the less economy-focused retail segment rather than the high-mileage fleet market.