Newly produced Nissan cars at the company’s plant in Sunderland, UK
Photographer: Ian Forsyth / Bloomberg
Photographer: Ian Forsyth / Bloomberg
The auto industry dodged disaster when the UK and the European Union unified trade deal after Brexit, but not before automakers announced factory closures and turned down plans to make several new vehicles in the country.
Even with last week’s deal, more damage could be done. Automakers including Nissan Motor Co. may struggle to make some UK assembled models eligible for tariff-free exports to the EU as they assess whether they source enough of their components locally. Costs associated with switching suppliers and the burden of customs declarations, certifications and audits can still convince car companies that they should invest elsewhere.
“This is still a small deal with major implications and costs for the automotive industry,” he said David Bailey, professor of business economics at Birmingham Business School in England. “Much will depend on the degree of flexibility allowed and the degree of phasing.”
Industry is under threat
Number of cars produced annually
Source: data SMMT 2019
The stakes for the UK economy are enormous. The country’s auto industry employs more than 860,000 people, more than a fifth of whom are employed by vehicle and parts factories. The industry shipped 42.4 billion pounds ($ 57 billion) worth of cars and parts abroad last year, 13% of the country’s total exports. The Brexit deal eliminates the risk of a widespread exodus, but could still fall short for automakers who lack the leeway to spend more.
Ones to watch
Nissan and its Japanese colleagues are the companies to keep an eye on after the deal. The outlook was bleak before the Brexit deal was reached.
The company recently decided not to make an electric model at the factory in Northern England almost two years ago plans to build another SUV on the same site have been scrapped. Honda Motor Co. is closing its only UK car factory next year.
Nissan and Toyota Motor Corp. hybrid and electric models. those built in England are getting some slack in the Brexit trade deal, with the accord allowing a higher proportion of vehicle content to come from outside the UK or the EU. Still, the initial so-called rules of origin require 10 percentage points more local content than what the UK was looking for.
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It’s unclear whether Nissan’s all-electric Leaf hatchbacks, built in Sunderland, have enough local content to avoid charges. Although Nissan welcomes the trade agreement, it will now “assess the detailed implications for our business and products,” said Azusa Momose, a spokeswoman for the company in Yokohama, by email.
Toyota’s Corolla hybrid compact cars built in Burnaston, as well as the non-electrified vehicles assembled at the site, are eligible for tariff-free exports to the EU, said Sonomi Aikawa, a company spokeswoman in Tokyo. The company is benefiting from its engine plant in Wales, she said.
The Nissan Leaf electric car.
Photographer: Ian Forsyth / Bloomberg
The automakers’ future tariff requirements may be affected by their plans to bring more of their battery supply chains to the region. Electric vehicles are given another six years to bring their share of foreign content below 45%, the threshold for petrol and diesel cars will be adhered to immediately.
“The timing underscores the urgent need for the government to create the conditions that will lure large-scale battery production to the UK and transform our supply chains,” said Mike Hawes, CEO of the Society of Motor Manufacturers and Traders, the UK automotive industry. trade group. “Improving the UK’s competitiveness will be essential to help alleviate the additional costs and burdens that our new trade relationship will bring.”
‘Green light’
Other carmakers have delayed investment in UK factories pending the outcome of trade talks.
BMW AG has postponed work on a next generation Mini platform due to uncertainties about the UK’s trade relations with the EU. Chief Financial Officer Nicolas Peter said BMW May Consider Making Mini Cars In Germany Or China This Month If Tariffs Undermine UK Manufacturing Business Case
PSA Group CEO Carlos Tavares said in March, the maker of Vauxhall automobiles would determine whether there was a business case for its Ellesmere Port plant, and that the company could ask the UK government to offset any trade barriers.
BMW and PSA welcomed the trade deal, while warning that they would need to scrutinize the deal to assess its impact on their operations.
“It is hoped that the deal will now give the green light to major investments in the UK that were stalled amid uncertainty over Brexit,” said Bailey, a professor at Birmingham Business School. “There will be additional costs to the industry in terms of non-tariff barriers, but it could have been much worse.”
– Assisted by Stefan Nicola, Christoph Rauwald, William Wilkes, Shiho Takezawa and Tsuyoshi Inajima