Brexit Necessitates New Trade Deals for European Auto Industry

According to professor of Industry at Aston University David Bailey, Britain’s recent Brexit vote spells for “big uncertainty” for the auto sector. Without any kind of deal facilitating trade between the EU and the UK, the auto industry could face up to 10% tariffs on exports in transportation.

brexitThat would pose a major problem for both entities, as the UK exports over three quarters of its car output and over half of that goes to other European countries on the continent.

“What we don’t want in two years’ time is to go back to [World Trade Organization] rules which involve 10% tariffs on car exports,” Bailey explained.

“Remember, Bailey continued, “the car industry has had about 8 billion pound investment in the last four years- companies coming here to produce largely for the European market. We do not want to deter that.”

“So, we need to make it clear to those companies as quickly as possible that free access to the European market is still in place and we will have a good trading relationship with Europe,” the professor concluded.

According to recent studies, over 1.5 million cars will constructed in the United Kingdom over the course of 2015, up about 4% from last year. The European auto industry had just begun to really bounce back from the financial crisis of 2009 before the Brexit vote threatened to throw the industry into disarray again.

According to Ford Motors Co., which has a sizable presence in the UK despite being a US-based company and boasts a staff of around 14,000 in Europe, the company would “take whatever action is needed to ensure that our European business remains competitive and keeps to the path toward sustainable profitability.

Nissan was one of the few auto companies to put forward its honest and negative opinion of Brexit before the vote:

“There are going to be a lot of questions about (whether) you want to continue to invest in the UK for Europe if the UK is outside Europe,” Nissan CEO Ghosn said during an interview with CNBC.

A 10% tariff obrexbrexexports between the UK and the rest of Europe are sure to limit car sales across borders, but coverage of the tariff may only scratch the surface of the industry adjustments that could occur as a result of the recent vote.

A myriad of standards will have to be discussed, agreed upon and legalized between the UK and EU if they no longer consist of one economic entity with agreed-upon industry standards. Whether environmental regulations for vehicles will differ across borders and what will bed one about this when it comes to vehicle purchases and ownership in different neighboring countries remains to be seen.

That said, the EU has only been around for just over two decades and has been plagued by turmoil ever since its installation. The UK tends to be the problem child of the coalition, not wanting to adopt the Euro and being straight forward about its frustration that other countries’ financial short comings see to hold back the economic powerhouse.

 

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