A new report published by the Society of Motor Manufacturers and Traders (SMMT) shows that the UK’s collective car repair bill could rise by more than £2 billion if tariffs and other barriers to trade were imposed.
The potential hike in SMR costs follows warnings that the price of new cars and vans would also increase dramatically if UK government ministers failed to agree a trade deal with the European Union (The Buzz: May 2017).
“Some £1,500” could be added to the cost of every new car sold in the country, according to the 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 calculated 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 including tariffs, which the SMMT called “the worst foreseeable outcome” for the UK automotive industry.
The ‘Importance of the Aftermarket to the UK Economy 2017’ report, commissioned by the SMMT from independent consultancy Frost & Sullivan, reveals that a 2.5% to 4.5% WTO tariff on imported car parts would trigger an average extra £21 a year for replacement components. Meanwhile, quotas, subsidies, customs delays and regulatory barriers could add an additional £49, resulting in a £2.14 billion rise in the UK’s collective car maintenance bill.
Some 80% of replacement car parts fitted to British cars are imported, with almost three quarters of them coming from European Union-based suppliers.
It was therefore vital, said the SMMT, that the government sought an interim arrangement to avoid a ‘cliff-edge’ if a trade deal was not finalised at the end of the Brexit negotiation process. Such an arrangement should maintain membership of the single market and customs union until a final agreement on a new relationship with the European Union, was negotiated and implemented, said the organisation.
Mike Hawes, SMMT chief executive, said: “If we don’t secure a new trading relationship with the European Union that is free of tariffs and customs checks, [there could be] significant increases to annual car repair bills due to new tariffs and other trade barriers.
“Government must now prioritise an interim arrangement that maintains single market and customs union membership until the right trade deal with the European Union is implemented.”
The report found the UK’s car servicing and repair sector grew again in 2016, with turnover rising 2.4% to a record £21.6 billion. The increasing level of advanced technology in modern vehicles requiring the replacement of more hi-tech components is proving to be a major influencing factor in the rising cost, as well as the increasing number of vehicles on the road in-part driven by the ever-improving reliability of models meaning they have a longer operating life.