Automotive associations warn of €110 billion no-deal Brexit loss

14 September 2020

14 September 2020

With 15 weeks before the Brexit transition period ends, European automotive industry associations have issued a warning about the impact of no deal. According to new calculations, this could cost the sector roughly €110 billion in lost trade over the next five years. They urge both sides to secure ‘an ambitious free-trade agreement without further delay’.

In a joint statement, the automotive associations explained that World Trade Organisation (WTO) tariffs would put the production of some three million EU and UK built cars and vans at risk. This would come at a time when the industry already faces €100 billion in lost production value so far this year due to the coronavirus (COVID-19) crisis.

United against no-deal

Organisations representing vehicle and parts manufacturers from across the EU and UK came together to warn against a no-deal Brexit. The 23 associations included; the European Automobile Manufacturers' Association (ACEA), the European Association of Automotive Suppliers (CLEPA), the Society of Motor Manufacturers and Traders (SMMT), the German Association of the Automotive Industry (VDA), and the French Automobile Manufacturers' Committee (CCFA).

‘The stakes are high for the EU auto industry – we absolutely must have an ambitious EU-UK trade agreement in place by January. Otherwise, our sector – already reeling from the COVID crisis – will be hit hard by a double whammy,’ said Eric-Mark Huitema, ACEA director-general.

Before COVID-19, EU and UK vehicle production was running at 18.5 million units a year. This year, some 3.6 million units have already been lost due to the pandemic. The associations state that for cars and vans alone, a reduction in demand resulting from a 10% WTO tariff could wipe some three million units from EU and UK factory output over the next five years. This could equal losses worth €52.8 billion to UK plants and €57.7 billion to EU ones.

‘A 'no-deal' Brexit would disrupt the integrated automotive supply chain and hit industry at a critical moment,’ said Sigrid de Vries, CLEPA secretary-general. ‘The impact will be felt far beyond the bilateral trade streams alone, translating into a loss of jobs and investment capacity. The automotive sector is the EU's largest private R&D investor with €60 billion invested each year. We need a deal that maintains the sector's global competitiveness.’

Japan-UK agreement

Meanwhile, late last week, the UK secured its first post-Brexit trade deal with Japan. The UK’s Department for International Trade estimates that a free trade agreement could increase trade between both countries by £15.2 billion (€16.4 billion) in the long-run when compared with 2018. This could add £1.5 billion, or 0.07%, to GDP in every year.

‘This is a historic moment for the UK and Japan as our first major post-Brexit trade deal,’ said International Trade Secretary, Liz Truss. ‘The agreement we have negotiated – in record time and in challenging circumstances – goes far beyond the existing EU deal, as it secures new wins for British businesses in our great manufacturing, food and drink, and tech industries.’

However, the deal looks to be broadly based on the EU’s existing agreement with Japan and has been considered by some as low-hanging fruit - especially when compared with the ongoing trade talks with the likes of the US.

The SMMT welcomed the news of a Japan-UK Free Trade Agreement. ‘This agreement should help foster a mutually beneficial automotive trade and investment relationship between the two countries, building on a shared automotive history that stretches back more than 40 years,’ said Mike Hawes, SMMT chief executive.

‘While we await the full terms of the agreement and, in particular, evidence that it will deliver in full on industry’s priorities for the progressive lifting of tariffs and reduction of regulatory barriers, the conclusion of such an FTA represents a significant milestone for our industries.

‘We hope the deal can be ratified swiftly but, for both sides to benefit fully, we still need to urgently complete an ambitious and tariff-free UK-EU deal – and time is rapidly running out,’ he added.

Brexit breakdown

In a recent video, Daily Brief editor Phil Curry, Anthony Machin, head of content and product at Glass's, and senior data journalist Neil King, discussed Brexit. They explored how continued uncertainty during the transition phase is hurting the automotive industry and impacting the new- and used-car markets.