UK and EU car makers warn of No Deal disaster

Car makers across the UK and the EU are urging politicians to secure a Brexit trade deal to avoid ‘catastrophic’ losses. 

Tariffs would threaten the production of 3 million EU- and UK-built cars and vans over the next five years. 

This would mean losses of up to £84billion for the European automotive sector, and threaten thousands of jobs. 

Warning: Tariffs would threaten the production of 3 million EU- and UK-built cars and vans over the next five years

Without a deal in place by 31 December, both sides would be forced to trade under so-called World Trade Organisation (WTO) non-preferential rules, including a 10 per cent tariff on cars and up to 22 per cent on vans and trucks.

Such tariffs – far higher than the small margins of most manufacturers – would almost certainly need to be passed on to consumers, making the average family car around £1,500 more expensive to purchase.

The industry has warned that the impact could also likely result in reduced choice for drivers if motor manufacturers are forced to reconsider the availability of some of their vehicles. 

Furthermore, automotive suppliers and their products will be hit by tariffs. This will make production more expensive or will lead to more imports of parts from other competitive countries.

Mike Hawes, SMMT chief executive

Speaking for the UK industry, Mike Hawes, of the Society of Motor Manufacturers and Traders, said: ‘These figures paint a bleak picture of the devastation that would follow a No Deal. 

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

Before the coronavirus crisis hit, EU and UK production of motor vehicles was running at 18.5 million units a year.

So far in 2020, some 3.6 million units have already been lost across the sector due to the pandemic.

Estimates now suggest that, for cars and vans alone, a reduction in demand resulting from a 10 per cent WTO tariff could wipe some three million units from EU and UK factory output over the next five years, with losses worth £48.8 billion to UK plants and €57.7 billion (£53.3 billion) to those based across the EU.

Suppliers would also suffer from these changes.

It has been estimate that around 3.6 million units have already been lost across the automotive sector in the UK an EU due to the pandemic

The SMMT was joined with the European Automobile Manufacturers Association (ACEA) and the European Association of Automotive Suppliers (CLEPA), along with 21 national associations to call on ministers to find an ‘ambitious’ EU-UK free-trade agreement with automotive-specific provisions, which they described as being ‘critical to the European automotive industry’s future success’. 

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.’