UK car makers face £102bn 'no deal' Brexit cliff-edge

European and British automative industry leaders have joined forces to call for a free trade agreement (FTA) between the bloc and the UK to prevent a no-deal Brexit before the end of the transition period.

The 23 industry giants, including the Society of Motor Manufacturers and Traders (SMMT), the European Automobile Manufacturers Association (ACEA) and the German Association of the Automotive Industry (VDA), want negotiators to secure a deal that delivers zero tariffs, modern rules of origin and avoids different regulations across the channel.

With just 15 weeks left till the end of the UK’s withdrawal, the group also warns of the “severe repercussions” for the sector that employs 14.6 million people.

Failure to seal a deal could risk a trade loss worth up to €110bn (£102bn, $130.2bn) over the next five years to 2025. The “bleak picture” comes after the coronavirus crisis already wiped €100bn in motor vehicle production value.

The two sides could be forced to trade under World Trade Organisation (WTO) rules in the absence of a FTA by 31 December, which could see 10% tariffs placed on cars and up to 22% on vans and trucks.

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According to new figures — for cars and vans alone — a reduction in demand resulting from a 10% WTO tariff could erase some three million units from EU and UK factory output to 2025, meaning UK plants could lose a whopping €52.8bn and those based across the EU up to €57.7bn. Suppliers would also suffer from changes in trading rules.

The pandemic has already caused production of motor vehicles to lose some 3.6 million units across the sector this year, while before COVID-19 hit, EU and UK production was running at 18.5 million units a year.

“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," Mike Hawes, SMMT Chief Executive, said.

Eric-Mark Huitema, ACEA Director General, has also called for an ambitious EU-UK trade deal by January 2021, warning that “the stakes are high for the EU auto industry,” which is reeling from the COVID-19 crisis.

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President of VDA, Hildegard Müller, said: "The automotive industry needs stable and reliable framework conditions.

“It would be to the great disadvantage of both sides if the UK withdrawal were to end with the application of tariffs in mutual trade. This would jeopardise closely linked value chains and possibly make them unprofitable.

“Our member companies have more than 100 production sites in the United Kingdom. We hope that the EU and the UK will continue their close partnership - with a comprehensive free trade agreement."

The EU and UK automotive industries spend some €60.8bn on innovation per year and are responsible for 20% of the global motor vehicle production, making it Europe's largest research and development (R&D) investor.

A vital part of the UK economy, the car sector employs around 168,000 people in manufacturing and 823,000 across the wider automotive industry, it also accounts for 14.4% of total UK export of goods and invests £3.75bn each year in automotive R&D.