The United Kingdom and the European Union are negotiating free trade despite Brexit. The car industry may encounter a problem in this regard. Parts from outside the EU that are processed in British cars may still lead to import duties.
The UK and the EU are trying to work it out together when it comes to trade, now that the UK has left the EU. The British hope that import duties will not suddenly be levied on anything and everything. This is also important for the local car industry, otherwise there is a good chance that manufacturers for the European market will turn their backs on the UK and move to a country within the EU. According to BBC however, a problem now arises in the negotiations. This is because parts from outside the EU are used in cars that are produced in the UK. The EU does not seem to want to turn a blind eye to this for the time being.
The British hope that the parts will be considered part of a British product by the EU. Then they would also fall entirely under the trade agreements to be made. However, it seems that parts from outside the EU – including those manufactured in Japan and Turkey – will still be treated separately. According to Globaldata this could be particularly detrimental to Nissan and Toyota. They source many parts for British production from non-EU countries.
The EU would have set a lower limit of at least 55 percent of own British production (including parts from the EU) for products to be classified under free trade. In the case of Toyota and Nissan, so many parts would come from outside the UK and the EU that the 55 percent is not achieved with some cars. This then leads to a different import status for those cars and therefore also to higher costs to be able to sell them in the EU. Should that indeed turn out to be the case, there is a good chance that the manufacturers concerned will once again scratch their heads about whether they want to stay in the United Kingdom.