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AutoInformed warned you: Ahead of this evening’s Brexit summit, Europe’s auto manufacturers and suppliers through *ACEA have issued an unambiguous warning on the potentially far-reaching impacts of a no-deal scenario on their sector, which would threaten their very business model.
Automobile production plants – be they in the EU27 or the UK – receive and fit millions of parts into vehicles every day. All manufacturers rely on ‘just-in-time’ and ‘just-in-sequence’ delivery and production, without any delays or obstacles. These parts are in constant transit in trucks, arriving as and when they are needed. (Brexit Automaker Winners, Losers – Predictable and Surprising)
Every day 1,100 EU trucks cross the Channel to deliver to car and engine plants in the United Kingdom alone, for example. After Brexit, even short hold-ups at customs will cause massive logistical problems, disrupting the production process and generating significant costs.
“Our members are already making contingency plans and are looking for warehouse spaces to stockpile parts,” stated Erik Jonnaert, Secretary General of the European Automobile Manufacturers’ Association (ACEA), which represents the 15 major Europe-based car, van, truck and bus manufacturers. “However, the space required to stockpile for more than a short time would be absolutely huge – and expensive.”
“Some of our members are also planning a temporary post-Brexit production shutdown. But the harsh fact is that no amount of contingency planning can realistically cover all the gaps left by the UK’s withdrawal from the EU on WTO terms.”
Under WTO rules, a 10% tariff would be applied to all cars traded between the EU and the UK. Jonnaert: “We cannot forget that profit margins in our industry are significantly lower than 10%. At the end of the day, these extra costs will either be passed on to the consumer or will have to be absorbed by the manufacturers.”
“The clock is ticking, but it is not yet too late. That is why we are urging the negotiating teams on both sides to redouble their efforts to successfully conclude a withdrawal deal,” Jonnaert underlined.
Sigrid de Vries, Secretary General, **European Association of Automotive Suppliers (CLEPA): “Everything possible must be done to secure a future exchange of goods, services and people that is frictionless. Automotive components often cross borders several times before the final product reaches the customer, and that includes Channel crossings. Any change in the level of integration of the value chain will have an adverse effect on the competitiveness of individual companies and the sector.”
“Smaller companies, that constitute important building blocks of the supply chain, do not have the internal systems, IT platforms or staff in place to deal with customs declarations, tariff classification, customs valuation, or calculations based on content origin. SMEs will be forced to deal with at least some of these issues if they want to continue to trade and serve their customers, facing additional financial and logistical risks, ” said De Vries.
CLEPA recently surveyed its membership and “the most important feedback to policy makers was: remove uncertainty. It remains crucially important to provide clarity on the future relation with the UK as quickly as possible, starting with a withdrawal agreement so that a cliff-edge scenario can be avoided.”
*ACEA represents the 15 major Europe-based car, van, truck and bus manufacturers: BMW Group, DAF Trucks, Daimler, Fiat Chrysler Automobiles, Ford of Europe, Honda Motor Europe, Hyundai Motor Europe, Iveco, Jaguar Land Rover, PSA Group, Renault Group, Toyota Motor Europe, Volkswagen Group, Volvo Cars, and Volvo Group.
**CLEPA, the European Association of Automotive Suppliers, represents over 3.000 companies supplying state-of-the-art components and innovative technology for safe, smart and sustainable mobility, investing over 20 billion euros yearly in research and development. Automotive suppliers in Europe employ nearly five million people across the continent.
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No-Deal Brexit would be catastrophic for our industry: I have spent my entire career in the commercial vehicle sector and had to work through some challenging economic conditions, and now there is a real risk that the worst could be about to come. As we edge nearer to exiting the EU, the consequences of getting Brexit wrong are becoming stark.
The worst scenario of all is no deal whatsoever. We recently surveyed our members to get a broader picture of what the impact could be on the automotive industry. The findings are seriously concerning: Three quarters of UK automotive businesses fear a ‘No-Deal’ Brexit will threaten their future viability. More than half said their operations have already suffered because of the uncertainty about future trading arrangements. Almost a third said they had postponed or cancelled UK investment decisions, with one in five having already lost business as a direct consequence.
Many have altered logistics and shipping routes, investment in warehousing, stock and adjustments to production schedules. Of particular concern would be the need to have haulage permits to move trucks across borders: under the legislation, which dates back to 1974, there are not enough to go around. This factor alone could bring the industry to a standstill.
Today our industry employs 856,000 people and 80% of everything we make is exported, most to the EU. This success has been dependent on free and frictionless trade afforded by the single market and customs union. No deal would end the seamless movement of goods, resulting in disruption at the border and delays, throwing Just-in-Time manufacturing into chaos and undermining the competitiveness of the sector – ultimately putting profitability and jobs at risk. (Nigel Base is SMMT Commercial Vehicle Manager – editor)
“Frictionless trade as part of the EU single market and customs union has driven the success of the UK automotive industry so the fact we are leaving is already painful, and already causing damage. Leaving without a deal would be catastrophic – plants will close; jobs will be lost. Leaving is not what we wanted, but we recognise that the withdrawal agreement has been hard-fought and, crucially, delivers a transition period which steps us back from the cliff-edge. We need a deal now, and we need an ambitious deal for the future that guarantees frictionless trade with our most important market – nothing else will do, and we urge all parties to remember what’s at stake.”
Mayor of London on the EU Summit
The Mayor of London, Sadiq Khan, said: “This summit was supposed to be the final chance to agree a Brexit deal – but due to the appalling incompetence and infighting of Theresa May’s Government there is still a huge risk of no deal at all.
“After two chaotic years, the Prime Minister can’t even agree a Brexit position within her own party, let alone with the EU.
“The options on the table are now limited to Theresa May’s proposed bad deal for Britain or no deal at all – both of which would be disastrous for London’s economy and would limit opportunities for the next generation.
“I held regular meetings with former Brexit secretary David Davis and have reached out to his successor Dominic Raab to discuss London’s needs in the Brexit negotiations. Extremely disappointingly and despite being in the role for three months, he has so far failed to meet me.
“The ongoing chaos, infighting and ineptitude shows exactly why it’s so crucial that the British public get the opportunity to have their say on the final deal – which is what thousands of people will call for this weekend as they march through the streets of London.”
The automobile industry of Japan would like to express its respect and appreciation for the great efforts being made by the governments of the United Kingdom and the European Union with the aim of reaching an agreement on the withdrawal of the UK from the EU. Despite those efforts, an agreement has not been reached by the original deadline of October 2018. Apprehension is therefore growing that a “withdrawal without agreement” may become a reality.
JAMA member companies currently operate 14 production plants and 17 research-and-development and design centers across the EU, including in the UK. In 2017, those plants produced 1.5 million vehicles and 170,000 people were employed, directly or indirectly, in JAMA member companies’ EU-based operations and related activities. Japanese automakers’ contributions to the economy and employment in the UK and the EU position us as stakeholders in the automobile industry in both the UK and Europe. For those contributions to continue, it is necessary that an unimpaired trade environment between the United Kingdom and the European Union be maintained and that the automobile industry’s activities remain predicated on shared standards, including those regulating vehicle certification.
If no withdrawal agreement is reached and the transition period through December 2020 is consequently not implemented, corporate activities and consumers will be adversely affected by the impacts of suspended production activities resulting from failed just-in-time logistics operations, declines in revenue, and revised vehicle sales prices caused by spiralling logistics and production costs. We hope that both the UK and EU governments will continue to make maximum efforts to reach a satisfactory settlement and that a “withdrawal without agreement” is avoided at all costs.
We also ask that flexible responses be implemented to ensure a smooth transition for all relevant systems following the UK’s withdrawal, enabling minimal impacts on business activities.As corporate residents of the United Kingdom and the European Union, JAMA member companies will make every effort to continue to contribute to economic growth through their local operations.