The motor industry has warned of the “catastrophic consequences” of the UK leaving the European Union without a deal on October 31 with fleets – and consumers – told to expect major new car, commercial vehicle and component price rises.
What’s more the imposition of World Trade Organisation (WTO) tariffs and the end of barrier-free trade would almost certainly mean the collapse of the motor industry’s ‘just-in-time’ business model resulting in delays in the import of vehicles and components, all adding to fleet operating costs.
Meanwhile, there have also been warnings that with the supply of plug-in vehicles in the European Union market already under pressure – the UK is currently the third largest market in the European Union for electric vehicles – a ‘no deal’ Brexit could further hamper UK supply.
A total of 23 organisations from across the European motor industry – including the UK’s Society of Motor Manufacturers and Traders (SMMT) – have joined forces to stress the severe impact a ‘no deal’ Brexit.
With less than one month to go before the UK is due to leave the European Union, the organisations warned:
- ‘No deal’ would trigger a seismic shift in trading conditions, with billions of Euros of tariffs threatening to impact consumer choice and affordability on both sides of the Channel
- The end of barrier-free trade could bring harmful disruption to the industry’s ‘just-in-time’ operating model, with the cost of just one minute of production stoppage in the UK alone amounting to €54,700 (£50,000)
- WTO tariffs on cars and vans could add €5.7 billion (£5 billion) to the collective European Union-UK automotive trade bill, raising prices for customers if manufacturers cannot absorb the additional cost.
Automotive manufacturer leaders said that such disruption and cost “must be avoided, and that all effort should be made to deliver an orderly withdrawal of the UK from the European Union”.
The imposition of trade tariffs would trigger price increases – unless brands and their retail networks could absorb the additional costs which some have already warned they cannot – with the possibility of:
- The list price of cars rising by 10%
- Commercial vehicle prices rising by up to 22% (an average 13.5% for light vans)
- The cost of vehicle components by up to 4.5%.
It has been suggested that new car prices could rise by an average of £1,500-£1,800 and £70 could be added to the cost of a typical vehicle service.
What’s more, some motor manufacturers have previously warned that the burden of price rises could mean that available model choice was reduced.
Meanwhile, fleets can expect the in-life cost of vehicle operations to also rise as a result of a ‘no-deal’ Brexit. Experts have suggested that service, maintenance and repair (SMR) costs could rise by 10%, while such an increase – along with the rise in the price of components – would also trigger a surge in insurance premiums.
Mike Hawes, chief executive of the SMMT, said: “European automotive is deeply integrated and the benefits of free and frictionless trade have helped our sector become one of Europe’s most valuable assets, delivering billions to economies and supporting millions of livelihoods across the European Union.
“A ‘no deal’ Brexit would have an immediate and devastating impact on the industry, undermining competitiveness and causing irreversible and severe damage. UK and European Union negotiators have a responsibility to work together to agree a deal or risk destroying this vital pillar of our economies.”
Sigrid de Vries, secretary general, of the European Association of Automotive Suppliers (CLEPA), said: “The European automotive industry is operating highly integrated global supply chains. A single vehicle consists of around 30,000 parts many of which cross borders multiple times. Frictionless and tariff-free trade, as well as regulatory certainty, is vital. Brexit has a negative effect on all these aspects. Brexit, specifically a ‘no deal’ Brexit, will be seriously damaging to the supplier’s industry in Europe and the UK and must be avoided.”
Separately, the British Vehicle Rental and Leasing Association (BVRLA) said in a ‘no deal’ Brexit briefing note that the Government needed “to use existing regulatory and policy tools to ensure sufficient incentives for carmakers to sell ultra-low emission vehicles in the UK in the event of a ‘no deal’.
With motor manufacturers bound by fleet emission targets which if breached result in huge fines, the BVRLA said: “It is not clear in a ‘no deal’ that UK sales of battery electric and plug-in hybrid electric vehicles would count towards a manufacturer’s European Union carbon emissions targets, creating a disincentive to sell ultra-low emission vehicles into the UK market. This will impact our ability to achieve net zero emissions targets.”