Newly manufactured Nissan cars at the company’s factory in Sunderland, UK
Photographer: Ian Forsyth / Bloomberg
Photographer: Ian Forsyth / Bloomberg
The car industry dodged the disaster when the UK and the European Union sealed a the post-Brexit trade deal, but not before vehicle manufacturers announced factory closures and canceled plans to manufacture several new vehicles in the country.
Even more damage can be done even with last week’s deal. Car manufacturers included Nissan Motor Co. it could have difficulty qualifying some models assembled in the UK to export them duty-free to the EU as they assess whether they come from its components sufficiently locally. The costs associated with having to change suppliers and the burdens of customs declarations, certifications and audits could leave automotive companies convinced that they are better off investing elsewhere.
“This remains a minimal deal with significant implications and costs for the car,” 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 gradual introduction.”
Industry under threat
Number of cars produced annually
Source: SMMT 2019 data
The bet on the UK economy is massive. The country’s automotive industry it employs more than 860,000 people, more than a fifth of whom work in vehicle and parts factories. Last year, the sector shipped 42.4 billion pounds ($ 57 billion) of vehicles and components overseas, 13% of the country’s total exports. The Brexit deal eliminates the risk of a widespread exodus, but it could still be short for vehicle manufacturers with little room for maneuver to take on more spending.
Some to see
Nissan and its Japanese partners are the companies to watch out after the deal. The outlook was already bleak before reaching the Brexit deal.
The company recently decided not to manufacture an electric model in the factory in the north of England and almost two years ago rejected plans to build another sports utility vehicle on the same site. Honda Motor Co. it is will close its only British car plant next year.
Nissan i The hybrid and electric models from Toyota Motor Corp. built in England are frequently reduced in the Brexit trade deal, with the deal allowing a higher proportion of vehicle content to come from outside the UK or EU. However, so-called initial rules of origin require 10 percentage points more local content than the UK was looking for.
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It’s unclear whether the all-electric Leaf hatchbacks, built in Sunderland, have enough local content to avoid fees. While Nissan welcomes the trade deal, it will now “evaluate the detailed implications for our operations and products,” Azusa Momose, a company spokeswoman in Yokohama, said in an email.
Toyota’s Corolla hybrid compact cars built in Burnaston, as well as the non-electrified vehicles assembled on site, meet the requirements to be exported duty-free to the EU, said Sonomi Aikawa, a company spokeswoman in Tokyo. The company benefits from its engine plant in Wales, he said.
The Nissan Leaf electric vehicle.
Photographer: Ian Forsyth / Bloomberg
Tariff requirements for vehicle manufacturers in the future may be affected by their plans to bring more of their battery supply chains to the region. Electric vehicles will be given six more years so that their amount of foreign content is less than 45%, the gasoline and diesel threshold will be maintained immediately.
“The times underscore the urgent need for the government to create the conditions that will attract large-scale battery manufacturing to the UK and transform our supply chains,” said Mike Hawes, executive director of the Society of Motor Manufacturers and Traders, the UK car industry. trade group. “Improving the UK’s competitiveness will be essential to help mitigate the additional costs and burdens caused by our new business relationship.”
‘Green light’
Other vehicle manufacturers have postponed investments in UK plants pending the outcome of trade talks.
BMW AG delayed work on a new generation Mini platform due to uncertainties about the UK’s trade relations with the EU. Said financial manager Nicolas Peter this month, BMW would consider making Mini cars in Germany or China if tariffs undermined the business case of producing them in the UK
Said the CEO of the PSA group, Carlos Tavares in March, carmaker Vauxhall would determine whether there was a commercial case for its factory in the port of Ellesmere and whether the company could ask the British government to compensate for any trade barriers that might arise.
BMW and PSA welcomed the trade deal, warning that they should look closely at the deal to assess the implications of their operations.
“The deal is expected to give the green light to the big investments in the UK that had stalled amid the uncertainty of Brexit,” said Bailey, a professor at Birmingham Business School. “There will be additional costs for the industry in terms of non-tariff barriers, but things could have been much worse.”
– With the assistance of Stefan Nicola, Christoph Rauwald, William Wilkes, Shiho Takezawa and Tsuyoshi Inajima