Brexit: Automotive industry warns of ‘no deal’ devastation

Automotive companies from across the UK and EU are calling for an ambitious free trade deal, warning that ‘no deal’ will have a catastrophic impact on the industry.

If no deal is reached and ratified before December 31, World Trade Organisation (WTO) non-preferential rules, including a 10% tariff on cars and up to 22% on vans and trucks would apply. 

Such tariffs – far higher than the small margins of most manufacturers – would almost certainly need to be passed on to consumers, making vehicles more expensive, reducing choice, and impacting demand. Furthermore, automotive suppliers and their products will be hit by tariffs, they say.

New calculations, published today (Monday, September 14) by the Society of Motor Manufacturers and Traders (SMMT), suggest that a reduction in demand resulting from a 10% WTO tariff for cars and vans could reduce EU and UK factory output over the next five years by three million units.

That would equate to losses worth €52.8 billion (£48.7bn) to UK plants and €57.7bn (£53.2bn) to those based across the EU. Suppliers would also suffer from these changes, it says.

The lead organisations representing vehicle and parts makers across the EU, the European Automobile Manufacturers Association (ACEA) and the European Association of Automotive Suppliers (CLEPA), along with 21 national associations, including the SMMT, have joined forces to warn that this combined loss in trade value would seriously harm one of Europe’s most valuable assets.

Collectively, the EU27 and UK automotive sector is responsible for 20% of global motor vehicle production and spends some €60.8bn (£56bn) on innovation each year, making it Europe’s largest R&D investor. 

The SMMT’s chief executive, Mike Hawes, said:  ”These figures paint a bleak picture of the devastation that would follow a ‘no deal’ Brexit.

“The shock of tariffs and other trade barriers would compound the damage already dealt by a global pandemic and recession, putting businesses and livelihoods at risk.

“Our industries are deeply integrated so we urge all parties to recognise the needs of this vital provider of jobs and economic prosperity, and pull out every single stop to secure an ambitious free trade deal now, before it is too late.” 

The industry says that any deal should include zero tariffs and quotas, appropriate rules of origin for both internal combustion engine and alternatively fuelled vehicles, plus components and powertrains, and a framework to avoid regulatory divergence.   

Crucially, it says that businesses need detailed information about the agreed trading conditions they will face from January 1, 2021, to make preparations. This, combined with targeted support and an appropriate a phase-in period that allows for greater use of foreign materials for a limited period of time, will ensure businesses are able to cope with the end of the transition period. 

Eric-Mark Huitema, ACEA director general, said: “The stakes are high for the EU auto industry – we absolutely must have an ambitious EU-UK trade agreement in place by January. Otherwise our sector – already reeling from the COVID crisis – will be hit hard by a double whammy.”

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