No Brexit tariff-free trade deal could trigger huge increase in vehicle and component costs

A failure by the government to secure a tariff-free trade deal as it negotiates the UK’s exit from the European Union will increase the price of new cars and vans by thousands of pounds and also raise the cost of replacement parts.

“Some £1,500” could be added to the cost of every new car sold in the country, according to the Society of Motor Manufacturers and Traders (SMMT) if trade tariffs were implemented on the UK as a result of Brexit; the European Automobile Manufacturer’s Association (ACEA) has calculated that the price of light commercial vehicles could rise by 10-22%, cars by 10% and the cost of parts and components by 2.5-4.5% for parts based on current tariff levels; while a study by the PA Consulting Group calculates an average £2,372 rise in new car prices.

The price rise warnings come because a failure by the UK government to secure a tariff-free trade deal during Brexit negotiations would mean the adoption of World Trade Organisation (WTO) rules, which the SMMT called “the worst foreseeable outcome” for the UK automotive industry.

Not only would the imposition of trade tariffs hit the price of news vehicles and components, but they would also impact on the competitiveness of the UK motor industry.

The SMMT said the UK government and the European Union needed to reach a deal which “avoided tariffs, harmonised regulation and ensured the European and UK automotive industries remained the engine for growth, innovation and jobs”.

The SMMT continued: “We need a trade policy aligned to a strong industrial strategy that supports the specific needs of the sector for all the investment, reshoring and export opportunities. We need an outcome that maintains growth, innovation, consumer choice and the long-term future of the industry.”

The PA Consulting Group report – ‘Brexit: The Impact on the Automotive Supply Chain’ -countered that it would be up to manufacturers if they chose to pass all the additional tariff costs on to buyers.

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