EU and UK carmakers have today warned a ‘no deal’ Brexit disaster could cost the sector €110 billion over the next five years.
AND they have united to call for an urgent agreement of an ambitious free trade deal before the end of the transition period in just 15 weeks’ time.
The lack of a trade deal between the EU and Britain from 2021 would lead to tariffs which will hike the cost of vehicles and have an impact on demand.
Britain’s Society of Motor Manufacturers and Traders (SMMT) said in a statement that “new calculations show the catastrophic impact of ‘no deal’ with World Trade Organisation (WTO) tariffs, putting production of some three million EU and UK built cars and vans at risk over next five years”.
“‘No deal’ would mean combined EU-UK trade losses worth up to €110 billion to 2025, on top of around €100 billion in lost production value so far this year because of coronavirus crisis,” said SMMT, adding: “To avoid a second economic hit to a sector employing 14.6 million people, the industry calls for negotiators to secure a deal urgently that delivers zero tariffs, modern rules of origin and avoids different regulations across the channel.”
The lead organisations representing vehicle and parts makers across the EU, the European Automobile Manufacturers Association (ACEA) and the European Association of Automotive Suppliers (CLEPA), along with 21 national associations, including the Society of Motor Manufacturers and Traders (SMMT), German Association of the Automotive Industry (VDA), Comité des Constructeurs Français d’Automobiles (CCFA) and La Plateforme automobile (PFA), are warning the sector could “face severe repercussions”.
They fear economies and jobs on both sides of the channel are at risk of a second devastating hit in the shape of no deal.
“Without a deal in place by December 31, both sides would be forced to trade under so-called WTO non-preferential rules, including a 10 per cent tariff on cars and up to 22 per cent on vans and trucks,” said SMMT.
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”.
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, claim the industry representatives.
Mike Hawes, SMMT Chief Executive, said: “These figures paint a bleak picture of the devastation that would follow a ‘no deal’ Brexit. The shock of tariffs and other trade barriers would compound the damage already dealt by a global pandemic and recession, putting businesses and livelihoods at risk.
“Our industries are deeply integrated so we urge all parties to recognise the needs of this vital provider of jobs and economic prosperity, and pull out every single stop to secure an ambitious free trade deal now, before it is too late.”
Eric-Mark Huitema, ACEA Director General, added: “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.