Nissan cars recently manufactured at the company’s factory in Sunderland, UK
Photographer: Ian Forsyth / Bloomberg
Photographer: Ian Forsyth / Bloomberg
The car industry avoided disaster when Britain and the European Union sealed a post-Brexit trade agreement, but not before carmakers announce plant closures and cancel plans to make more new vehicles in the country.
It is possible to do more damage even with last week’s agreement. Car manufacturers, including Nissan Motor Co. it could struggle to qualify some models assembled in the UK for duty-free export to the EU, while assessing whether it supplies its components sufficiently locally. The costs associated with the need to change suppliers and the burden of customs declarations, certifications and audits could continue to leave car companies convinced that they are investing better elsewhere.
“This is still a thin business with major implications and costs for cars,” he said David Bailey, professor of business economics at Birmingham Business School in England. “Much will depend on the degree of flexibility allowed and the degree of gradual introduction.”
Industry under threat
Number of cars produced annually
Source: SMMT 2019 data
The stakes of the British economy are massive. The car industry in the country it has over 860,000 employees, of which over a fifth are employed in vehicle and parts factories. The sector sent over 42.4 billion pounds ($ 57 billion) of machinery and components abroad last year, 13% of total domestic exports. The Brexit agreement eliminates the risk of large-scale exodus, but it could still fall short for carmakers with too little room for maneuver to incur more spending.
Some to watch
Nissan and its Japanese counterparts are the companies to follow after the transaction. The outlook was already bleak before the Brexit deal was concluded.
The company recently he decided not to make an electric model at his factory in the north of England almost two years ago abandoned plans to build another sports utility vehicle in the same place. Honda Motor Co. It is closing its only car factory in the UK next year
Nissan and Hybrid and electric models of Toyota Motor Corp. built in England are weak in the Brexit trade agreement, the agreement allowing a higher proportion of vehicle content to come from outside the UK or EU. However, the so-called initial rules of origin require 10 percentage points more local content than what the UK was looking for.
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It is unclear whether the fully electric Leaf Hatchbacks built in Sunderland have enough local content to avoid taxes. While Nissan welcomes the trade agreement, it will “now assess the detailed implications for our operations and products,” said Azusa Momose, a spokeswoman for the Yokohama company.
Toyota’s Corolla Hybrid compact cars built in Burnaston, as well as on-site non-electrified vehicles, qualify for duty-free export to the EU, said Sonomi Aikawa, a spokesman for the Tokyo-based company. The company benefits from its engine factory in Wales, she said.
Nissan Leaf electric vehicle.
Photographer: Ian Forsyth / Bloomberg
Tariff requirements for car manufacturers in the future may be affected by their plans to bring more battery supply chains to the region. Electric vehicles will be given another six years to reduce the amount of foreign content below 45%, and the threshold for petrol and diesel cars will be kept immediately.
“The moments underscore the government’s urgent need to create the conditions to attract large-scale battery production to the UK and transform our supply chains,” said Mike Hawes, executive director of the Automobile Manufacturers and Dealers Company. UK trade group. “Improving the competitiveness of the United Kingdom will be essential to help alleviate the additional costs and burdens of our new business relationship.”
‘Green light’
Other carmakers have postponed investment in UK factories pending the outcome of trade negotiations.
BMW AG has delayed work on the next generation Mini platform due to uncertainties related to the UK’s trade relations with the EU. Chief Financial Officer Nicolas Nicolas said this month BMW would consider the production of Mini cars in Germany or China if tariffs undermine the business case of their production in the UK
Said the CEO of the PSA group, Carlos Tavares In March, carmaker Vauxhall will determine if there is a business case for its Ellesmere Port plant and that the company could ask the British government to compensate for any trade barriers that may arise.
BMW and PSA welcomed the trade agreement, warning that they would have to look closely at the agreement to assess the implications for their operations.
“It is hoped that the agreement will give the green light to major UK investments that have been blocked amid the uncertainty of Brexit,” said Bailey, a Birmingham Business School professor. “There will be additional costs for the industry in terms of non-tariff barriers, but things could have been much worse.”
– With the assistance of Stefan Nicola, Christoph Rauwald, William Wilkes, Shiho Takezawa and Tsuyoshi Inajima