The UK Society of Motor Manufacturers and Traders (SMMT) is intent on looking at the broader picture as the Brexit agreement terms become clearer.
Mike Hawes, SMMT’s chief executive said: “Securing a deal with the EU that works for automotive has been the industry’s top priority for the last four and a half years.
“It is, therefore, of great relief that this could now be in place with the potential to unlock continued preferential access to key markets around the world. With the Trade and Co-operation agreement (TCA) in place, the industry will continue to work closely with government to identify essential areas for investment and support to ensure UK Automotive retains its global competitiveness, helping transition the country into post-Brexit, post-Covid prosperity, while delivering on ambitious environmental goals.”
He added: “For automotive, Brexit has always been about damage limitation, and the draft TCA, while no substitute for the completely free and frictionless trade with Europe we formerly enjoyed, will address immediate concerns.
“Further ahead, we must pursue the wider trade opportunities that Brexit is supposed to deliver while accelerating the UK’s transition to electrified vehicle manufacturing. With the deal in place, government must double down on its commitment to a green industrial revolution, create an investment climate that delivers battery gigafactory capacity in the UK, supports supply chain transition and maintains free-flowing trade – all essential to the UK Automotive sector’s future success.
German car makers urge overcoming “the practical hurdles”
In 2020 the UK was the largest export market for German car makers.
The president of the German Association of the Automotive Industry (VDA), Hildegard Müller, expressed relief following the announcement of the Brexit agreement. “This outcome has eliminated the risk of a ‘no deal’ Brexit and at last companies can concentrate on implementing a free trade agreement,” she said.
The UK is the largest foreign export market for German OEMs. The German automotive industry operates over 100 production plants in the UK, most of which belong to German supply companies. Suppliers in the UK also depend heavily on the EU market. Some motor vehicle parts cross the English Channel several times before a vehicle is finished. This shows just how close the ties are between British factories and those in the EU-27.
“The agreement now negotiated enables us to avoid some of the adverse effects of a hard Brexit. Now it is important to overcome the practical hurdles as quickly as possible. Long traffic queues to cross the Channel are not in the interests of people on either side of the new border. Time is running out,” Hildegard Müller warned.
The VDA added in a statement: “The precise details of the deal have not yet been fully disclosed. Companies have little time to prepare for the required changes. Furthermore, the EU Member States and the European Parliament still have to ratify the agreement.”
Hildegard Müller stressed: “We also hope that solutions have been found for the difficult topic of rules of origin, so that our members can in fact utilize the advantages of the agreement.”
The UK is a crucial partner for the German automotive industry. It is Europe’s second largest passenger car market after Germany, totalling approx. 2.3 million new registrations in 2019. In terms of sales volume, the UK was the German OEMs’ largest export market in 2019.
“Too many questions unanswered” warns Vehicle Remarketing Association
The UK Vehicle Remarketing Association (VRA) has described the Brexit agreement as “thin” as it leaves many unanswered questions that could have serious implications for the UK motor industry.
The trade organisation says that several key points surrounding the future of manufacturing and cross-border movement of vehicles remain vague or undefined.
Sam Watkins, chair at the VRA, said: “Let’s be clear on this – any deal is good news because it avoids the kind of tariffs that would’ve been attached to no deal. It is something that should be a huge cause for relief.
“However, the deal that we now have raises as many questions as it answers. It is generally being described as ‘thin’ and that is accurate in that there are several areas where there is very little detail for the motor industry or remarketing.
“We are probably entering into a process now where those points are going to be worked through but it seems that some will be easier to resolve than others.”
She said that the hope was that the degree of certainty now present would enable near-term investments in manufacturing, such as the new Nissan Qashqai in Sunderland, to go ahead.
“The threat of motor manufacturing in the UK potentially unravelling overnight has been removed, and this should mean that there is no immediate question mark over UK factories and supply chains.
Substantial costs added
“However, looking ahead, substantial costs have been added in terms of the new customs arrangements, and the regulatory background against which car makers operate is unclear in several important areas.”
Notably, there were special difficulties surrounding the rules of origin arrangements, Watkins added, that could have implications for EV manufacturing in the UK.
“This is not a simple subject but a lot of good work has been done in this area by David Bailey of Birmingham Business School, who has advised the VRA previously, and I’d urge anyone interested to seek out his blogs on the subject.”
In terms of the direct impact on the used vehicle sector and remarketing, the most obvious immediate effect would be disruption to car and van supply, she said.
“It’s quite difficult to separate the negative effects of the pandemic and Brexit but getting hold of a number of popular new models is almost certainly going to be tricky in 2021. For a motor industry that has finished last year around 30% down in new car sales compared to 2019, this is not good news, and there will be knock-on effects for the used sector that will persist into the medium term.
“Specifically, the reduced numbers of vehicles entering the market will mean that getting hold of the stock needed by used retailers is going to remain difficult and the situation may even worsen compared to the last few months.
“The post-Brexit, coronavirus market is one in which the core functions of remarketing have become more important than ever. When it comes to sourcing the right vehicles at the right price, ensuring their condition, retailing them and then getting them to the customer, all in a secure fashion – then the expected standards in every single one of these areas are being forced upwards by market conditions.
“There is every reason to expect these trends to continue. Certainly, as a trade body, we see the next few months as one where our role is to guide and support our members through times that continue to be turbulent and which promise to remain so for some time.”