Urgent action is required to avoid a 'no deal' Brexit, according to a warning from the Society of Motor Manufacturers and Traders (SMMT).
A 'no deal' result cannot be an option, it says, due to the potential negative effects on the industry's ability to function. Consequently, both UK and EU negotiators must agree the terms for a 'managed withdrawal' and 'status quo transition' as soon as possible with the time remaining.
The SMMT met with EU representatives in Brussels during September in order to highlight the repercussions of a 'no deal' Brexit to businesses, economies and jobs across both sides of the Channel.
Analysis from the SMMT suggests that the introduction of tariffs on light vehicles, resulting from 'no deal', could add £5bn to the EU and UK's collective auto trade bill.
If import tariffs are passed onto customers, the cost of UK-manufactured cars being sold in the EU could increase by an average of £2,700. This would likely have a significant impact on vehicle demand, profitability of operations as well as jobs in the UK economy.
On the other hand, UK buyers of EU-made cars or vans could face price increases of between £1,500 and £1,700 if manufacturers and dealers are unable to absorb rising costs.
Out of every 10 cars registered by motorists in the UK, seven are manufactured by factories in Europe. Additionally, UK car manufacturers export over 40% of their products to EU nations.
Furthermore, the UK exports approximately £3.4bn of vehicle components to Europe each year. The majority of components utilised in UK car manufacturing are also provided by EU suppliers - up to three times the amount exported by the UK, in fact.
These parts can cross EU borders multiple times before being used in final assembly, with very few stops for customs checks. This process supports an extensive range of supply chain roles across the connected EU economies.
SMMT chief executive, Mike Hawes, said: “Tariffs alone should be enough to focus minds on sealing a withdrawal agreement between the EU and UK but the potential impact of no-deal means the stakes for the automotive sector are far higher.
“Without a deal, there can be no transition period and the complex issues surrounding tariffs and trade, customs, regulation and access to talent will remain unresolved.
“Our industry is deeply integrated across both sides of the Channel so we look to negotiators to recognise the needs of the whole European automotive industry and act swiftly to avoid disruption and damage to one of our most valuable shared economic assets.”
The SMMT has warned that – should Brexit go ahead without an explicit withdrawal agreement– the deadline on March 30th 2019 will see "severe" disruption at minimum to this existing trade, causing negative impacts on production levels, competitivity and the industry as a whole.