The news that Toyota is to invest £240 million in upgrading its UK factory is a strong signal that the company sees the UK as part of its long-term future. Whilst this is good news, the UK carmakers know that Brexit with the possibility of tariffs and complex customs arrangements may threaten their competitiveness and “just-in-time” supplies. Although the final position is unknown, what is without question is that the automotive industry must assess the impact, generate options and be prepared.
PA Consulting Group’s new research, ‘Brexit: The impact on the automotive supply chain’, identifies three possible scenarios emerging even if partial trade restrictions exist:
The cost of moving to a World Trade Organisation (WTO) regime (10% tariff on finished vehicles and 4.5% tariff on component parts) for UK car makers will be especially challenging given their typically low margins. PA Consulting’s analysis calculates that the potential cost increase under WTO arrangements could be as much as £2,372 per car. Equally, European based manufacturing companies would face similar costs for exporting to the UK from mainland Europe. Increased time delays at borders could also impact “just-in-time” supply chains that are currently standard for the industry.
Tim Lawrence, global head of manufacturing at PA Consulting Group, said: “Both the EU and the UK would benefit from keeping free trade and supply chains unaffected because any tariffs would be damaging for both sides based on today’s complex supply chain arrangements.
“Car makers will have to review their manufacturing and supply chain network and investment decisions and plan for scenarios based on extra tariffs and charges/incentives on corporation tax. Some may consider investment options into the UK, but equally some may consider investing into the EU.”
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