Automakers are preparing for the final Brexit deadline by moving cars and parts both ways across the English Channel to ensure they are not hit by tariffs if the UK and EU fail to reach a trade agreement.
Trade between the UK and the EU will be governed by new rules from January 1, but imported cars will become 10% more expensive overnight if tariffs are imposed under the Organization’s regime World Trade.
Industry sources said automakers have built up additional stocks of cars and parts in the UK, as they have now during three previous Brexit deadlines, when the increasingly exasperated industry was threatened with a shakeup. ” on the brink “to different trade agreements.
Volkswagen, the world’s largest carmaker and the UK’s second most popular brand by sales, is one of the companies with more imported cars than normal. A spokesperson insisted that it was not possible to attribute this directly to Brexit, as the company also accumulates reserves to cover factory closings at Christmas and prepare for the March license plate change, when sales tend to rise.
Honda has stockpiled parts to ensure it can continue to build its Civic model in Swindon, though the factory is cutting production before closing next year.
It is also understood that some car dealers are importing more stock from Europe before the deadline, according to two people who work with companies on their plans.
“If there is an opportunity to introduce vehicles into the country before January, it would be foolish not to,” said a person from a large automaker.
Michael Woodward, UK automotive leader at consultancy Deloitte: “The challenge is to forecast what is the ‘right’ action. Getting the wrong stock could be as costly as not having enough, but the change in consumer behavior and the impact of Covid-19 on car sales makes it increasingly difficult to forecast demand even in the short term. “
British businesses have expressed their hopes that a Brexit deal will be reached just days before the end of the transition period, as the UK-EU talks enter a crucial week.
“Covid-19 has exposed the resilience of companies. Successive installments are already costing companies, which have seen cash reserves disappear and inventories dwindle, “said Josh Hardie, deputy director general of the Confederation of British Industry (CBI), which represents some 190,000 companies.
“It is time for business and political schedules to converge, rather than compete. Companies need a deal now, ”he said. The group also underscored the urgent need for clarity for companies.
One area of the automotive sector where the increase in demand can be predicted with confidence is electric cars. However, products are still relatively in short supply as automakers begin mass production, Woodward added.
The threat of disruption as of January 1 looms over all companies that sell across borders, regardless of size. Morgan, the maker of handcrafted classic-style cars, only produces about 800 cars a year, but is rushing to finish orders for customers in Europe before the Jan.1 deadline.
The UK carmaker, which was bought by Italian investors last year, said: “This is to guard against potential delays and the initial impact of currently unknown tariffs on vehicles.”
The storage of parts or products has become widespread because it is one of the few aspects that remains under the control of companies, although keeping parts or cars in warehouses and parking lots can mean that large amounts of money are immobilized.
The Society of Engine Manufacturers and Traders found earlier this month that 60% of its members were spending significantly on warehousing and more than half had hired customs brokers to prepare for the new paperwork.
The industry has spent more than £ 235 million on Brexit preparations during 2020, although that cost will pale next to the imposition of tariffs, which would immediately add an average of £ 1,900 to the cost of imported cars.
The owner of Mercedes-Benz, Daimler, and VW’s Porsche have already agreed to pass on the cost of the tariffs to UK customers.
For UK factories, the threat is potentially greater than lost sales: Nissan has repeatedly warned that the business model at its Sunderland plant, Britain’s largest, would not be sustainable if tariffs are imposed, and a The PSA Group’s decision on whether to replace Vauxhall Astra production at Ellesmere Port, near Liverpool, is long overdue.
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