A ‘hard’ Brexit could add as much as £2,372 per car, as a result of Britain moving to a World Trade Organisation regime, according to analysts at PA Consulting.
Such a move would result in the introduction of a 10% tariff on finished vehicles and 4.5% tariff on component parts for cars.
PA Consulting added European based manufacturing companies would face similar costs for exporting to the UK from mainland Europe. Increased time delays at borders could also impact “just-in-time” supply chains that are currently standard for the industry, it said.
In its research, the company highlighted three possible scenarios which might emerge from any new trade restrictions:
- For manufacturers and suppliers with substantial operations in the UK and with good UK market exposure will be likely to encourage suppliers to locate and expand their offerings into the UK.
- For manufacturers and suppliers with substantial operations in the EU or overseas and with satellite operations in the UK focusing on exports to the EU, it may make sense to relocate manufacturing to the EU. PA Consulting noted: “The increased cost of exporting 200,000 cars per year could be £460m which in two years would easily pay for the cost of a new plant in the EU area.”
- For EU manufacturing companies or suppliers who export finished vehicles and components into the UK may end up moving some manufacturing to the UK, dependent on import volumes and costs of supply. Under this scenario, the price of imported cars will increase for UK customers, with increased prices covering the costs of any tariffs.
Tim Lawrence, global head of manufacturing at PA Consulting Group, said: “Both the EU and the UK would benefit from keeping free trade and supply chains unaffected because any tariffs would be damaging for both sides based on today’s complex supply chain arrangements.
“Car makers will have to review their manufacturing and supply chain network and investment decisions and plan for scenarios based on extra tariffs and charges/incentives on corporation tax. Some may consider investment options into the UK, but equally some may consider investing into the EU.”
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