UK Carmakers Could Be Hit With Steep Tariffs After Brexit As Cars Might Not Be British Enough

British car manufacturers could be on the verge of receiving post-Brexit tariffs because not enough of their components are sourced from local suppliers.

Generally, UK firms must prove that 50 to 60 per cent of a product’s components come from within the UK to escape tariffs. However, the Automotive Council states that on average, UK cars are only 44 per cent British-made, Bloomberg reports.

Carmakers are currently permitted to classify parts sourced from Europe as British-made, allowing them to escape tariffs. However, when the country leaves the European Union, all of that will change as rules of origin policies are enforced, forcing brands to research using local suppliers at potentially higher prices.

A spokesman from Honda has already said that the company is already investigating new suppliers for the Civic, currently manufactured in the town of Swindon.

“If we have a free-trade agreement with the EU after Brexit, then we’ll have to have rules for determining whether the cars coming out of the U.K. really are considered British cars,” said Peter Holmes, an economist at the U.K. Trade Policy Observatory. 

Secretary general of European auto supplier association CLEPA, Sigrid de Vries, says that a number of car companies are “considering various options.”

“Changes will be complex and painful. The automotive industry is a prime example of how the EU internal market has helped underpin competitiveness in the face of global competition: The sector operates on the global market place,” she confirmed.

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  • rover10

    One way to avoid being subjected to such a policy, in part, could be to ask UK companies to buy/ lease indigenously manufactured vehicles. Government could also create tax incentives to enable UK products to be the vehicles of choice. The EU is now sharpening its knives to punish the UK regardless, of what European manufactures concerns are about such a strategy. Jaguar Land Rover, Honda,Toyota and Nissan can offer ranges, that could fill the gap left behind by the EU products.
    Don’t the bureaucrats in Brussels know that by imposing tariffs to change the automotive landscape, could actually backfire? I for one, would advise against shortsighted measures.

    • Fled

      You are mistaken. No bureaucrats in Brussels are imposing anything. All trade rules, even the ones governing customs unions like the EU are governed by the World Trade Organisation (WTO). None of this should come as a surprise to anyone as these rules and tariff rates have long been established and are available to all. You also seem to think these tariffs will be optional. If no deal is struck with the EU, these WTO tariffs will automatically be applied.

      Sure the UK could create tax incentives for local SME suppliers to step in and provide components, however I assume that contracts will have to be broken by OEMs, and non-UK suppliers will have to be compensated. Also there is the issue of type approval. Many UK suppliers will not be able to easily pass compliance testing for safety like larger component suppliers like BOSCH for example, so switching suppliers will certainly not be possible in all cases.

      You may not like this, but the only shortsighted measure I see was breaking away from the EU.

      • rover10

        Your last statement is misguided, the UK has pressed the democratic button to leave the EU. Admittedly, we will need to comply with WTO guidelines however, if they render the UK’s situation as hopeless, then too many universal interests will fall into the melting pot. Rules are there to be challenged, especially where they place a nation or nations in a perilous trade position. UK suppliers need to step up to the plate, and take on the task to supply considerably more parts, and if necessary EU based suppliers may need to consider establishing supply plants in the UK. I feel sure the UK will prove to be a good base for major auto suppliers and manufacturers, to gain all the advantages of the UK’s new global freedom?

        I still stand by the notion that incentives to buy more UK manufactured products would be one big step to minimize the effects of Brexit, both in the short and long term. I stand by the notion, that no problem is unresolvable. As for WTO’s grip on trade rules, the US under Trump will surely challenge many of its paradigms.

        • Fled

          Fair enough, and I respect that optimism. As a researcher specialising in the automotive industry, and being based in the UK, I certainly hope the UK will pull through and end up in a better place. I still am saddened however that we (the UK) will also miss out on the Canadian trade agreement just signed, and the dropping of tariffs on Japanese cars as we exit. Interesting times to say the least.

          • rover10

            At the end of the day that’s all the UK has, optimism. However, she’s an old country and a wise one at that who has faced many new challenges throughout her history. She has many instruments at her disposal in order to take on the future. The minucci of regulations should not get in the way of becoming creative, in how to conduct business, post Brexit. Well that’s my hope.

  • mikelike

    YES they will have to use Lucas fuel injection , lucas abs , lucas airbags , lucas ecu , lucas canbus and smith instruments !!

  • ME

    They should tax all the stupid idiots in parliament and string Tony Blair up for the BS they pulled on their native English people by forcing them to mix with those from Shira lands