Car prices could soar after a hard Brexit, study suggests
The cost of a new car in the UK could be about to soar. According to research published yesterday, Britain moving to a World Trade Organisation regime after Brexit would lead to the introduction of a 10 per cent tariff on finished vehicles and a 4.5 per cent tariff on component parts for cars.
If manufacturers pass that cost directly on to customers – and taking all the stages of production into account – the price tag for a new vehicle could soar by as much as £2,372 per car, according to PA Consulting, which conducted the study.
The management consultancy group found that EU exports account for around 57.5 per cent of cars sold in the UK and that a hard Brexit would therefore be “the worst-case scenario” for manufacturers.
“Any change in tariffs and regulations will immediately impact the automotive supply chain and make sourcing of assembly parts and distribution of finished vehicles more costly, forcing organisations to rethink their medium to long-term strategies,” the group wrote. “Although the final position is still unknown, what is without question is that the automotive industry must assess the impact, generate options and be prepared,” it added.
The auto industry is broadly considered one of the sectors most vulnerable to the implications of a hard Brexit. In January, Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said that a failure by the UK to clinch adequate trade deals with the EU after Brexit “could damage UK automotive manufacturing beyond repair”.
Toyota earlier this month committed to investing £240m into modernising one of its plants in Derbyshire, but confidence among other major global manufacturers seems to have been bruised by Brexit. Late last month Nissan said it may “adjust” its business in the UK depending on the outcome of Brexit, potentially jeopardising 7,000 jobs at its Sunderland plant
The study by PA Consulting also shows that European based manufacturing companies would likely face additional costs for exporting to the UK from mainland Europe under a hard Brexit.
Increased time delays at borders, as a result of necessary administrative processes, could also impact “justin-time” supply chains that are currently standard for the industry, PA Consulting said. Just-in-time strategies are generally used to increase efficiency by receiving goods immediately before they are required in the production process.
“Both the EU and the UK would benefit from keeping free trade and supply chains unaffected because any tariffs would be damaging for both sides based on today’s complex supply chain arrangements,” said Tim Lawrence, global head of manufacturing at PA Consulting.