UK’s car industry reels under Brexit heat

A clean break with EU’s single market will leave the UK’s car industry high and dry. It is no wonder that car manufacturing companies in the country have lobbied hard against Brexit. Brexit has not only put London’s financial credentials at stake but also its big bucks earning car industry.

A car industry body has reported that car manufacturing in Britain has hit a 17-year high in 2016, however with the UK deciding to leave the EU, the industry has reported a 33% drop in investment.

Car manufacturers have lobbied hard against Brexit since it would most likely result in the imposition of additional tariffs on the sector and leave UK plants at a significant disadvantage.

As per the Society of Motor Manufacturers and Traders (SMMT), 1.72 million vehicles were manufactured in Britain during 2016. However following the June 23 referendum investment in the sector, which determines a product’s line two to three years before a model rolls out of production lines, fell by $2.1 billion (1.66 billion).

“We do see companies at least delaying decisions until there is greater certainty,” Mike Hawes, SMMT’s CEO.

Among the more dominant concerns that is giving a major headache to the car industry body is the requirement of many trade-deals which state that 50% of more of the components should be manufactured locally.

Significantly, if Britain fails to secure a preferential treatment with the EU in its divorce negotiations which are likely to begin after March, subject to Britain’s parliamentary approval, the prices of cars in Britain are likely to shoot up by at least 10% due to a WTO tariff on exports.

“It would be very hard to overcome that level of additional cost, given that plants operate on wafer-thin margins,” said Hawes who went on to add that typically car manufacturers have around 2% to 4% return on their investment.

He went on to add, “We want trade deals, but they must be the right deals, not rushed deals. Failure to do so could damage UK automotive manufacturing beyond repair.”

With British Prime Minister Theresa May making her stance of a Hard Brexit clear, unfettered access to EU’s single market looks like a distant dream. Britain’s car industry body is hoping to retain some elements of free trade in the Brexit deal.

Before May revealed has Hard Brexit stance, In October Nissan has said it would build two new models at its Sunderland plant in North-East England.

According to source knowledgeable with the matter at hand, Nissan’s decision was taken after the May’s government pledged an extra support to counter any competitive loss incurred by the company once Britain leaves the EU.

A spokesman for the Prime Minister said, no explicit promises had been made on compensation for tariffs.

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