Two days before EU leaders meet to sign off on their guidelines for Brexit negotiations, the car industry is demanding the divorce deal guarantee tariff-free trade after the UK leaves the bloc.
Car manufacturers and vehicle parts suppliers are part of a line-up of industry groups that are making their case for a generous post-Brexit trade deal.
Heads of state from the 27 EU countries—all except the UK—will meet at a special summit in Brussels on Saturday (29 April) to finalise their position, which includes sticking points on citizens’ rights and the billions of euros the UK is expected to be required to pay into the EU budget before it leaves.
But negotiations for a trade deal are still far off—before that, there will be haggling over conditions for the UK to leave, which is expected to take up to two years.
Industry groups are already pushing for a trade agreement that does not slow just-in-time delivery of goods across borders or impose tariffs. They face obvious obstacles: the UK will leave the EU customs union and EU leaders insist the country must be treated differently once it leaves.
Supply chain worries
Auto associations claim their industry is especially vulnerable. Every vehicle that is made in Europe includes parts from factories spread across the bloc, making them more vulnerable to closed borders and customs checks, they have said.
“The key difference for our sector is that the core business model is the integral value chain,” Erik Jonnaert, secretary-general of the European Automobile Manufacturers’ Association, told reporters today (27 April).
Jonnaert held the press conference with executives from a European car suppliers association and the UK car industry lobby SMMT in a hotel located down the street from the European Council building where EU leaders will meet on Saturday.
A single car part might pass 15 EU borders before it is built into a vehicle—which, on average, contains 30,000 parts, said Sigrid de Vries of the European Association of Automotive Suppliers (CLEPA).
Seventy percent of finished cars bought in the UK are made in the EU. Car exports last year from the 27 EU countries to the UK were worth €42 billion.
Jonnaert warned that once the UK leaves the EU, tariffs could default to 10% for private cars, up to 22% for commercial vehicles and 3-4% for car parts.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said that when the UK leaves the EU, the UK car industry will need “another system which mirrors those benefits”. High tariffs and customs costs would drastically increase the cost of cars in the UK, he said.
Merkel warns against UK “illusions”
EU leaders insist there must be changes in the UK’s relationship with the EU after Brexit.
In a session of the Bundestag on Thursday (27 April), Angela Merkel said that the UK will not have the same rights as EU countries after Brexit, repeating a phrase she has used several times over the last few months.
“Some people in Britain still have illusions,” Merkel said.
The German Association of the Automotive Industry has argued against a so-called “hard Brexit” that would impose trade tariffs on the UK after it leaves the bloc. There’s a lot at stake for the country’s manufacturers: the UK is the German car industry’s biggest export market according to VDA, the German car manufacturers association.
Jonnaert, de Vries and Hawes all said they did not know of any manufacturers or car part suppliers that have left the UK since the Brexit referendum in June 2016, or of any that are planning to leave.
Nissan CEO Carlos Ghosn received undisclosed assurances from UK Prime Minister Theresa May last October and announced that the company would keep its UK factories despite his concerns over Brexit. Some 40,000 jobs rely on Nissan’s UK factories and supply chain.
Ghosn’s meeting with May sparked concerns over the UK car industry and jobs, as well as speculation over the UK government’s secret assurances to keep Nissan’s factories.
De Vries said it would be “short-sighted” if some EU countries see Brexit as an opportunity to lure UK-based car manufacturers and suppliers.
Slovakia’s ministry of economy hosted a “matchmaking” session with companies last November to sell its car industry and low costs. Volkswagen, Kia and PSA together employ 80,000 people in Slovakia. Around 200,000 people work in Slovakia’s car supply chain.
“In the end we are all in the same boat in many ways, even if labour costs are different in some parts of the EU,” de Vries told euractiv.com.
“That may be beneficial in an individual company’s case but not for the sector. The sector is competing with the US and China. Why complicate our lives?”
De Vries also said manufacturers in the EU have a “global advantage” because of EU rules on car type approval, which allow companies to sell throughout the bloc with approval from authorities in only one member state.