The car industry has been giving evidence to the Business Committee and it's quite alarming (HERE). Car sales have been falling month by month and Brexit is a huge potential problem for the complex cross border supply chains. Tariffs would have devastating consequences. The industry has a ROI (Return on Investment) of only about 2-4% so tariffs of 10% would make UK manufacturing very difficult.
We export a lot to the EU. Of total production about 80% is exported, 56% goes to the EU. But looked at from the other side of the Channel, only 7% of their production comes here. So, the impact of tariffs will be felt far more in Britain than in Europe.
Honda say it would be hard to take advantage of free trade deals because cars made here are only about 40% locally sourced, the rest comes from supply chains in the EU. Free trade deals usually require at least 55-60% local content to be exported. It also begs the question why any company would build or expand a plant off the west coast of Europe in order to export everywhere except Europe. They would more likely build the plant where it's needed.
Aston Martin raised the far more important problem of type approval. Cars approved in the UK are automatically approved in the other 27 countries. After Brexit we are a third country and manufacturers here will need to get separate EU type approval with all the attendant costs and time involved. Richard North (HERE) has checked the EU - South Korea free trade deal and found that they do not have a mutual recognition agreement and must obtain EU type approval before selling new models in Europe. Aston also seemed to believe they will have to stop production until EU approvals were obtained.
Finally the SMMT (Society of Motor Manufacturers and Traders) have 800 members. Some time before Brexit a survey (HERE) showed about twelve percent of them wanted to leave the EU. But now the CEO claims he cannot find a single member who would vote leave again. I presume this means the leavers voted without understanding what they were voting for! They were not alone.
