EU, UK carmakers express ‘no deal’ Brexit concerns

Carmaker associations in the EU and UK have joined forces to voice their concern regarding a possible “no deal” Brexit. They calculate this event could cost €110 billion ($131 billion) in lost trade over the next five years.

The automotive sector is already suffering from the effects of the coronavirus pandemic, but a further shock to the trade system without a Brexit deal would be “…devastating”, the associations add.

“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% tariff on cars and up to 22% on vans and trucks,” the associations say in a letter seen by Kallanish.

“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,” they continue. “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.”

The associations calculate that the production of 3.6 million units of vehicles has already been lost this year due to the coronavirus. Over the next five years a “no deal” Brexit could wipe away a further 3 million units of cars and vans production.

Combined, the EU27 and UK automotive sector is responsible for 20% of global motor vehicle production and spends some €60.8 billion on innovation per year. “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,” the associations conclude.