Analysis
22 Feb 19

First 10% Brexit tariff warning for UK fleets

UK fleets and private individuals have received their first official warning of a 10% import tariff on new vehicles if the UK leaves the European Union without a withdrawal agreement.

Porsche has written to customers placing orders for cars that will be delivered after 29 March (the day the UK is scheduled to leave the EU), to advise them that “a duty of up to 10%” may have to be applied to the purchase price of these cars.

In an official statement, Porsche said, “As one potential outcome of the Brexit negotiations, there is a possibility that a duty of up to 10% may be applied to cars imported into the UK by us after March 29. In light of this, we have chosen to inform customers whose cars are likely to arrive after Brexit occurs to warn them that they may be affected by this tariff - allowing them to be fully informed at the point of sale and, if they wish, to adjust their order accordingly. This is a precautionary step in the interests of allowing our customers to plan ahead."

Chances of no deal rises

Yesterday, Jean-Claude Juncker, president of the European Commission, said he was 'not very optimistic' that a no deal Brexit could be avoided, and said it would have "terrible economic and social consequences both in Britain and the EU". 

Last year the UK produced 1.52 million cars, of which 52.6% were exported to the EU. Only 12% of the UK’s 2.37 million new car market were made in the UK – about 85% came from the EU, accounting for about one-third of EU car exports.

To date, no other manufacturer, including Porsche’s owner Volkswagen, has any move to address the impact of a potential tariff on imported cars. However, in October 2017 Honda told a UK parliamentary committee that was investigating the implications of Brexit, “... a 10% tariff would make our vehicles uncompetitive, and would impose costs we cannot afford to absorb.”

Honda to close UK factory

This week, Honda confirmed plans to cease production of the Civic model (pictured above) at its UK plant in Swindon and to close the factory from 2021. Honda attributed the move to the rapid growth of the electric car market and its desire to repatriate its manufacturing closer to regions where it expects to sell more vehicles; Japan, China and the US.

The company denied its decision was Brexit related, and said it will maintain its European head office in the UK.

Katsushi Inoue, president, Honda Motor Europe, said, “In light of the unprecedented changes that are affecting our industry, it is vital that we accelerate our electrification strategy and restructure our global operations accordingly.”

However, amid a bitter Brexit debate in the UK, supporters of the campaign for the UK to remain in the EU seized on Honda’s decision as evidence of the negative impact of Brexit on UK manufacturing.

Nissan takes X-Trail back to Japan

Last month, Nissan announced that it had changed its plans and would no longer make the next generation X-Trail in the UK, and instead will manufacture the SUV in Japan. It will continue to produce the Juke and Qashqai in the UK, where it also makes the Leaf.

Nissan Europe Chairman Gianluca de Ficchy said, “Nissan is investing heavily in new technologies and powertrains for the next generation of vehicles in our Sunderland plant. To support this we are taking advantage of our global assets, and with X-Trail already manufactured in Japan, we can reduce our upfront investment costs.

“While we have taken this decision for business reasons, the continued uncertainty around the UK’s future relationship with the EU is not helping companies like ours to plan for the future.”

UK manufacturing outlook

Reflecting on the pressures facing UK automotive manufacturers, Mike Hawes, chief executive of the SMMT, which represents OEMs, said, “The global automotive industry is facing fundamental changes: technological, commercial and environmental, as well as escalating trade tensions, and all manufacturers are facing difficult decisions. The UK should be at the forefront of these changes, championing its competitiveness and innovation, rather than having to focus resources on the need to avoid a catastrophic ‘no-deal’ Brexit.”

Different global pressures are affecting the UK’s biggest motor manufacturer, Jaguar Land Rover, with the slowing of the economy in China and widespread anti-diesel sentiment undermining demand for its cars. Last year the company announced plans to reduce its global workforce by 4,500 people to improve its profitability.

Authored by: Jonathan Manning
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