Toyota demands ‘clarity’ over Brexit
Toyota, one of the world’s largest automakers, has called for more “clarity” for businesses over Britain’s negotiations to exit the European Union, warning that the fallout from Brexit could badly damage its operations in the country.
The remarks from a senior Toyota executive highlight the risks facing Britain as it navigates complex negotiations to leave the European Union. Though much of the concern regarding the issues facing the country has been focused on its crucial financial industry, it is also home to a major carmaking sector, as well as a variety of other high-tech businesses that are heavily reliant on European trade and supply chains.
Automotive manufacturing in Britain is mostly foreignowned, with Japanese carmakers like Nissan and Honda, along with Toyota, operating large, modern plants in the country. Those facilities were built largely to serve the European market, to which Britain has unimpeded tariff-free access.
Toyota’s facilities in Britain are just such a case, illustrating the complex supply and trading systems used across Europe by many companies. The carmaker treats its British plants as hubs in a Europe-wide system that allocates activities like design and manufacturing to various countries and keeps its accounts in euros. It exports about threequarters of the cars it assembles in Britain to the other 27 members of the European Union.
Didier Leroy, executive vice president of Toyota Motors and the chair of its Europe unit, told reporters at the Tokyo Motor Show that automakers in Britain needed more “clarity” about the terms of trade they would face after Brexit, which is scheduled to occur in 2019.
He also voiced worry that import tariffs or other new costs arising from Brexit would make manufacturing in Britain less attractive, implying that investment in operations in the country might be reduced in the future. “If we move to something like an import tax, trade tax or any kind of additional penalty, it will create a big negative impact in terms of competitiveness,” Leroy said.
His remarks echo the concerns of Japanese and other automakers in Britain, like Germany’s BMW, which makes the Mini in the country. They worry that Brexit could add to their costs and complicate the flow of vehicles, components and employees between Britain and the continent.
If the British government does not manage to negotiate barrier-free access to the European market after Brexit, vehicles made in the country “may face an import tariff ” of perhaps 10 per cent, according to Peter Wells, a professor at the Cardiff Business School. That could hurt the competitiveness of mass-market manufacturers’ Britain-based operations.
Toyota, he said, may be particularly vulnerable because it manufactures both cars and engines in Britain. A high proportion of British content might put the company’s vehicles into a foreign-made category elsewhere in Europe.
So far, carmakers in Britain have been patient, and moved ahead with investments necessary to keep their plants on track.
Toyota, for instance, said in March that it would invest 240 million pounds, or $315 million, to upgrade its plant in Burnaston, England, with the British government kicking in a further 21 million pounds for items like training and research.
Overall investment, though, appears to be sliding downward. According to the Society of Motor Manufacturers and Traders, a trade group, publicly announced investments in the British car industry fell to 1.7 billion pounds last year, from 2.5 billion pounds in 2015. The trade group attributes the falling numbers to carmakers holding back from commitments until they see how Brexit is likely to play out.
Car manufacturing in Britain employs about 170,000 people, according to the trade group.