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European motor manufacturers warn Brexit could trigger 22% new vehicle price rise

European motor manufacturers warn Brexit could trigger 22% new vehicle price rise

The implementation of trade tariffs on the UK as a result of Brexit could increase the price of light commercial vehicles by 10-22%, cars by 10% and the cost of parts and components by an average 3-4%, according to the European Automobile Manufacturer’s Association (ACEA).  

In the build-up to last weekend’s European Union-Brexit summit, European automobile manufacturers and suppliers sounded the alarm over the potential damage that Brexit could do to the competitiveness of the automotive industry.  

The sector represents 6.5% of the European Union’s GDP and provides employment to some 12.2 million Europeans across the continent.  

Automotive manufacturing is a highly complex industry. A single vehicle part may be composed of more than 30 components, and undergo over 100 process steps to become a finished product. It may pass through 15 countries, and cross borders multiple times in its material journey. A single vehicle, in turn, consists of around 30,000 parts, said ACEA.  

Vehicle manufacturers currently operate some 300 assembly and production plants in Europe. They often manufacture engines or transmissions in one country and assemble the final vehicle in another.  

As a result, the European Single Market provides for a high level of economic and regulatory integration. That level of integration was reflected in how the automotive industry had strategically set up its business operations in terms of supply chains, production sites and distribution networks, said ACEA.  

Today, the European Union is the UK’s biggest trade partner. More than half of all cars and 90% of all commercial vehicles built in the UK last year were bought by customers in Europe. The other way around, the European Union represents more than 80% of the UK’s motor vehicle import volume, worth €42 billion. Seven out of every 10 new cars sold in the UK come from European Union plants.  

Erik Jonnaert, ACEA secretary general, said: “Today, the automotive industries of the European Union and the UK are closely integrated; from the economic, regulatory and technical points of view. Any changes to this level of integration will most certainly have an adverse impact on automobile manufacturers with operations in the European Union or the UK, as well as on the European economy in general.”  

That impact, he said, would potentially be felt in a number of areas, including tariffs, customs procedures, the regulatory framework, and access to labour.  

The Society of Motor Manufacturers and Traders (SMMT) recently warned that a failure by the government to secure a tariff-free trade deal as it negotiated the UK’s exit from the European Union would add “some £1,500” to the cost of every new car sold in the country (Newsfeed: 31 March, 2017).

That’s because no deal at the end of the two-year Brexit negotiations would mean the adoption of World Trade Organisation (WTO) rules, in what the SMMT called “the worst foreseeable outcome” for the UK automotive industry.    

Sigrid de Vries, secretary general, European Association of Automotive Suppliers (CLEPA), said: “The European Union Single Market represents a fundamental driver of global competitiveness.  

“Vehicle manufacturers and component suppliers are entangled in a highly integrated manufacturing network spanning Europe. Tariff- and burden-free market access, as well as a stable and predictable regulatory framework, are crucial instruments to sustain the supplier industry’s technology leadership and secure investments and jobs.”