Among the many complicated outcomes of the Brexit deal, the UK’s automotive industry is under threat like never before. Manufacturers produced less than half the number of cars in 2022 compared to pre-referendum levels. Such a significant decline is symptomatic of an industry in distress, but what’s causing it?
How is Brexit impacting the UK automotive industry?
In an industry where importing parts and exporting vehicles is commonplace, Brexit has thrown a real spanner in the works. With the increased costs and legalities associated with importing and exporting, UK-made cars are now becoming less competitive overseas and more expensive here at home.
As the industry pivots towards electrification, Brexit poses another threat. With a lacking domestic supply chain for EV components, particularly battery technology, the cost of manufacturing EVs may become simply unsustainable with other countries able to output for much less. This risks manufacturers moving production operations to different countries where they can remain much more competitive.
Car giant, Stellantis, has warned that it could face 10% additional tariffs on EU exports because of regulations surrounding the origin of parts. These rules are set to become stricter in 2027, leading many manufacturers to consider closing UK factories – which would be disastrous for an already struggling economy and potentially cost tens of thousands of jobs.
What else is impacting the auto industry?
It’s been a turbulent few years for automotive businesses in general. Supply issues caused by global logistical challenges added more pressure on the industry still recovering from the pandemic.
2022 was a slow year for demand in the domestic market. Used car sales fell by nearly 8.5%, which can be partly attributed to the impacts of the cost of living crisis and inflation. There are still plenty of vehicles out there, such as used Citroen cars for sale, but many appear to be waiting to upgrade to electric when the time is right.
However, 2023 has started well for the new car market, with demand for electric and hybrid vehicles increasing year on year.
What are leaders calling for?
Automotive firms have called on the government to renegotiate parts of the Brexit deal about export laws and part origins. Current plans will see tariffs added on exports to the EU if less than 45% of the value of an electric car originates in the UK. This is set to rise to 65% in 2027.
The government has started talks with these firms and trade representatives from the EU.
Industry Demands Relaxation of Brexit Laws
The automobile sector has been vociferous about its worries and requests to ease Brexit restrictions. Industry leaders have urged the UK government to solve critical issues and reduce industry repercussions. Industry calls for Brexit legislation liberalization include:
Trade tariffs
Tariffs on automobile goods worry the industry. Industry leaders want taxes lowered or removed to be competitive and keep costs low. They also stressed the necessity of free trade agreements with the EU and other important markets to reduce trade obstacles and streamline exports and imports.
Customs Procedures
Just-in-time production and integrated supply chains dominate the automobile sector. Border delays and administrative burdens may impede effective operations. Business leaders have advocated customs simplicity and streamlining to minimize interruptions and guarantee product flow. They also stressed the need for EU customs harmonization to facilitate commerce.
Challenges Faced by the Automotive Industry post-Brexit
The automobile sector confronts several difficulties in the wake of Brexit. Tariffs and other trade restrictions drive up prices by preventing the free movement of products. New customs processes and documentation produce disturbances in the supply chain, which in turn causes delays. Adopting new standards to compensate for the EU’s departure adds complexity and expense.
In the end, the sector faces dangers due to the need for more confidence around future trade agreements and market access. These factors threaten the automobile industry’s efficiency, profitability, and competitiveness. Industry and government must work together to develop solutions to these problems and lessen the blow of Brexit.