European carmakers have warned that a no-deal Brexit could have a “seismic” impact on the industry.
Leaders from 23 major automotive business associations came together to urge caution in deciding a Brexit path.
“Brexit is not just a British problem, we are all concerned in the European automotive industry,” said head of the French automotive industry association CCFA, Christian Peugeot, in a statement.
The UK is home to a series of large automotive plants, including the Nissan factory in Sunderland, Toyota in Burnaston, Derbyshire, and the Vauxhall plant in Ellesmere Port, which is now operated by French carmaker PSA.
These plants rely on a wide supply chain which draws parts into the country from across Europe. The free movement of components is critical to just-in-time vehicle assembly, keeping part inventories – and costs – low.
This includes a variety of plastic parts – about 15% of a given vehicle is made of plastics, by volume.
In addition, 12% of new cars produced in Europe are shipped to and sold in the UK.
Should an assembly plant become unprofitable, it’s likely the parent company would have no choice but to consider closing the facility.
In July, Carlos Tavares, chief executive of PSA, said that while he would consider putting the new Astra into production at the Ellesmere Port plant, the plant would have to be profitable. In a statement to the Financial Times, he said: “If conditions are bad and I cannot make [Ellesmere Port] profitable, then I have to protect the rest of the company.”
This plant alone represents about 1,000 jobs. Should the plant be closed, these and jobs across the supply chain would be affected.
“The EU and UK automotive industries need frictionless trade and would be harmed significantly by additional duties and administrative burden on automotive parts and vehicles,” said Bernhard Mattes, head of the VDA automotive industry lobby group in Germany.
British prime minister Boris Johnson has unnerved the automotive industry with his support for a no deal Brexit, should an agreement covering the UK leaving the EU not be in place by 31 October.
A major sticking point is the so-called ‘back stop’ which would manage the border between Northern Ireland and its southern neighbour.
Brexit has seen carmakers curtail investment in the UK. According to the Society of Motor Manufacturers and Traders (SMMT), the industry lobby group in the UK, investment fell 70% to £90m over the first six months of the year.
The SMMT further warned that each minute of production lost due to a stopped assembly line could cost about £50,000.
In May, Honda announced that it would be closing its assembly plant in Swindon by 2021. While the carmaker did not directly point to Brexit as a reason for the closure, it is thought that the impact on part deliveries due to the UK leaving the EU customs union factored into the decision.
It is estimated that 50% of parts used in assembly at Honda Manufacturing of the UK are sourced in Europe.
Moving in the other direction, about eight out of 10 cars produced in the UK are exported. Of that number, ACEA, the European automotive trade association, says about half are bought by customers in the EU.