The UK automotive industry has issued a warning today that the Brexit trade deal signed on December 24 will lead to companies incurring additional costs, despite the sector having secured tariff-free trade with the EU, coming at a time when investment in electric vehicles is critical.
Photo: Erik Mclean / Unsplash
Part of the deal reached by London and Brussels was tariff and quota-free trade for the automotive sector, so long as the vehicles contained a minimum level of parts sourced from the bloc.
Also read: Beleaguered British auto industry receives Brexit blow from Brussels
The last-minute deal managed to prevent any major disruption from January 1, and a 10% tariff.
Despite this, industry body the Society of Motor Manufacturers and Traders (SMMT) said that increased bureaucracy, as well as the need for separate vehicle approval in the EU and UK, and other costs, would slowly but surely build up.
“It can be high single-figure percentage cost to an individual manufacturer. This is not a free deal,” SMMT Chief Executive Mike Hawes told Reuters.
“The paperwork ..., you used to do it on a minority of vehicles. Now you’re doing it on just about all your vehicles, apart for those that are going to the UK market.”
Automotive companies will need to have documentation to prove vehicles adhere to both EU and UK content thresholds, which have been set at 55% with a one-year grace period.
The local content provision has been set lower for electric vehicles at 40%, though is set to rise as a reflection of the battery content imported from Asia.
Countries across Europe - including Britain - will be vying for green investments such as a battery gigafactories as bans on combustion engine vehicles approach.
“One of the big challenges for the UK now is to... see battery manufacturing established in the UK and grow in the UK to compete with Europe, and indeed, compete more globally,” said Hawes.
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