A no-deal Brexit will see ‘’draconian tariffs’’ imposed on cars imported from the EU into the UK and would ‘’trigger the most seismic shift in trading conditions’’ ever experienced by the motoring industry.
The warning from industry experts and leading manufacturers such as Ford and Westfield comes with Brexit D-day just over two months away.
World Trade Organisation (WTO) tariffs would range from 10 to 20% and would have a devastating effect on the automotive and mobility industry, prompting specialists to urge Prime Minister Boris Johnson to fight harder to avoid a no-deal scenario before the October 31st deadline.
New figures released this summer revealed investment in the UK car industry has already collapsed by 70% in the continuing uncertainty over Brexit.
Just £90 million was invested here in the first half of 2019, compared with £2.7 billion annualised on average over the past seven years.
The Society of Motor Manufacturers and Traders (SMMT) also expects cars from Europe will cost £1500 more and said: ‘’Leaving the EU without a deal would trigger the most seismic shift in trading conditions ever experienced by automotive, with billions of pounds of tariffs threatening to impact consumer choice and affordability.’’
As Britain’s departure edges ever closer, the forecast is filled with unease and uncertainty.
Up until now Jaguar Land Rover has been vocal about the negative impact a no-deal Brexit could have, but recently admitted leaving the EU could still benefit Britain and not hamper sales in the country.
Julian Turner, CEO of Westfield, is also a big champion of Brexit boosting business and manufacturing in Britain.
However as confident as he is that this will happen under a no-deal departure, he also warned that cars and other mobility vehicles will in some cases become 20% more expensive.
Here, Auto Futures examines what lies ahead for the automotive and mobility industry post-Brexit.
The Impact of a No-Deal Brexit
John Gardiner, a spokesperson for Ford Britain, told Auto Futures: ‘’The tariffs imposed in a WTO (World Trade Organisation) default scenario would deal a significant blow to much of the complex and integrated automotive industry and, as things currently stand, would result in a 10% tariff on vehicles imported from the EU into the UK.
‘’It is imperative that all sides work together to avoid the imposition of such a draconian tariff regime on a large part of the UK auto industry and on consumers.’’
Painting a picture of the long-term consequences such an outcome would cause, he continued: ‘’In a no-deal Brexit scenario, the introduction of WTO tariffs would severely impact Ford’s operations in the UK and across Europe.
‘’This would be compounded by the border friction and deteriorating economic outlook, coupled with likely further Sterling devaluation that we expect in this scenario.’’
Last month Jaguar Land Rover reported a £395 million first quarter loss which it blamed on plant shutdowns as part of contingency planning ahead of the original Brexit date.
The loss for Britain’s biggest car maker, which is owned by Indian company Tata Motors, was 50% higher than in the same period last year and followed after a £120 million profit in the previous three month period.
Sales fell in China by 29.2% and there was also a decline in Europe and US, however, sales were 2.6% higher in the UK.
In April the company also reported that year-on-year sales had grown in the UK by 12.1% suggesting that Brexit hasn’t deterred motorists from buying new cars.
Brexit Should Help Regenerate the UK’s Manufacturing Heritage – But at What Cost?
Turner’s Westfield has been making sports cars since 1982 and, in recent years, has branched out to develop autonomous vehicles, which are currently in use at Heathrow’s Terminal 5 and London’s Greenwich.
The company is based in the West Midlands – regarded as the heart of the UK manufacturing industry. Turner is a huge champion of British talent and has spoken about how the country now has a reputation as a destination for cutting edge, innovative technology.
He also revealed his long-term goal is to see the UK’s manufacturing heritage regenerated once more and while he thinks Brexit will help, a no-deal exit could see it come at a cost.
Talking to Auto Futures, Turner said: ‘’It will help UK manufacturing as it is easier to manufacture here. Industries are changing and all companies need to be more agile – I think Brexit will accelerate this.’’
However, he warned that without a trade agreement in place, sales of both Westfield sports cars and autonomous pods will be affected. ‘’It is and will be a big problem,” he says. “It will effect sales of both cars and pods – making it in some cases 20% more expensive.”
He also highlighted the issue of legislation upon leaving the EU: ‘’The UK Government is trying its best to maintain type approval however if this is not carried over in some shape or form it will be a total disaster as countries may try to not recognise vehicles. Trade agreements currently do not have autonomous vehicles in mind – so this needs to be updated.’’
Forecasting the Threat of a No-Deal Brexit
The threat of a no-deal Brexit and the growing uncertainty has hit factories around Great Britain; output fell by a fifth in the first six months of the year to 666,521 cars, down 168,052 on the same period last year.
Figures released by the SMMT have shown that car manufacturers have spent ‘at least £330 million’ on contingency plans, as they organise factory shutdowns in advance of the original 31 March Brexit deadline.
As spokesman for the SMMT said a no-deal Brexit would be ‘’catastrophic for the sector’’ and the long-term consequences would see a gradual erosion of the motoring industry.
Painting a picture of the future, they added: ‘’The end to borderless trade could bring crippling disruptions to the industry’s just-in-time operating model.
‘’Delays to shipments of parts to production plants are measured in minutes, with every 60 seconds costing £50,000 in gross value added – amounting to some £70 million a day in a worst case scenario.’’
A new SMMT analysis suggests that no-deal and the resulting tariffs on light vehicles alone would add £5 billion to the collective EU-UK auto trade bill.
If passed directly on to consumers, import tariffs would push up the cost of UK-built cars sold in the EU by an average of £2,700, and that of light commercial vehicles by £2,000 – affecting demand, profitability and jobs.
Similarly, UK buyers of a car or van from the EU would be faced with £1,500 and £1,700 increases if manufacturers and their dealer networks were unable to absorb these additional costs.
The spokesman concluded: ‘’A no-deal Brexit is a significant threat to the industry.’’