How will Brexit impact the automotive industry?

After several years of tense build-up and speculation, Brexit has finally come to pass. The UK left the EU on January 1st, 2021 and started the new year with a raft of new regulations to contend with. The move is now guaranteed to have knock-on affects for countless businesses, not least those in the automotive industry.  

2020 was already a turbulent year for car makers and dealerships, with sales hitting a depressing 28-year low. With countless rumours and predictions being cast for the state of post-Brexit trade, what will this new era hold for manufacturers and drivers alike?

No-deal disaster averted

Many in the automotive industry had warned that a no-deal Brexit could have catastrophic effects. Manufacturers including Nissan, Toyota and Honda had warned they would be forced to move their UK operations if trade barriers made them unfeasible, but a last-minute agreement has eased some fears for now.

The confirmed Brexit trade deal sets out that new cars imported to the UK from the EU and those exported the other way will not incur new trade tariffs. Potential tariffs like those under World Trade Organisation rules would have added an expense of 10%, an incurrence which would likely have been passed on to customers.

This means instead that new cars sold this year should remain at a similar cost to those sold in 2020 when the UK was still an EU member. For drivers currently shopping around, be it for popular SUVs like the Peugeot 2008 or ever-present hatchbacks like the Vauxhall Corsa, this result is bound to come as good news.

The UK’s Society of Motor Manufacturers and Traders (SMMT) also welcomed the new trading agreement, describing it as a ‘platform for our future relationship.’

New restrictions come into force

Yet while a worst-case scenario has been averted, there will still be new regulatory burdens for one of the UK’s largest industries. One significant barrier is rules of origin, with the EU likely to place tariffs on UK cars manufactured with large amounts of non-UK or EU parts.

The UK will now need to self-certify the origin of its exports. Products taking over 40% of their value from non-UK or EU components will be subjected to costly trade tariffs.  

New customs procedures are also likely to have heavy impacts given the sheer volume of vehicles and parts traded between the UK and EU annually. The SMMT has called for a phase-in period to allow automotive businesses time to assess and adapt to the new regulations.  

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