PA’s Tim Lawrence, global head of manufacturing, is quoted in The Guardian, in an article examining how Brexit is putting a strain on the UK car industry.
The article explains how cross-Channel journeys made by carmakers and suppliers in Britain and the EU are intertwined. It goes on to say that the car industry is not just concerned about the impacts of new tariffs in the UK, but also whether the they will still be able to move parts across the Channel quickly and affordably, given that the speed at which parts are moved is critical.
Focusing on just-in-time production, an idea imported from Japan that involves components being added straight to the production line, rather than stored, Tim explains: “They schedule components on the production line and sequence it so parts arrive only hours before. You may think that sounds straightforward, but there is quite an art to this JIT supply chain. If you put a customs union in place, because you are no longer part of a single market, things could be delayed at the border for a couple of days – it really has an impact.”
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The article goes on the say that Theresa May has already warned that Britain is likely to leave the single market and customs unit as part of Brexit, meaning the free movement of goods could end. Tim explains that this could have severe implications.
Tim continues: “There are two ways [for a carmaker] to approach it. You could look to bring components into the UK to manufacture, so it could have a positive impact. But the challenge is if you are exporting 80% of the vehicles – like Nissan are or Vauxhall are from Ellesmere Port – you have to question the benefits of that if there will be tariffs on exports.
“The margins are slim for OEMs [original equipment manufacturer] – 5% to 10%. If you add a 10% tariff you could charge the customer more – which is unlikely – or you look at it very quickly and say ‘It’s going to cost us hundreds of millions of pounds a year or the cost of a new plant is £800m to £1bn, so let’s move manufacturing’.”