The deadline for signing a trade agreement between the EU and the United Kingdom is fast approaching. Free trade will come to an end in just over two months. Car manufacturers think they will lose millions of euros when it turns out to be a ‘no-deal Brexit’.
With just over two months to go until the deadline for a Brexit deal, talks between the UK and the European Union have not resumed. Car manufacturers must take into account the doom scenario that the powers do not conclude a trade agreement. Bentley, which produces its cars in Crewe with parts from Germany, will probably have to give up a quarter of the profit in that case. The luxury brand has already made preparations in the form of an air freight contract and building up a stock of parts. “It would be hugely damaging,” says CEO Adrian Hallmark Reuters. “If you look at the tax on the parts we buy and the 10 percent tax rate on cars, it’s going to cost us 20-25 percent of the profit.”
Daimler CEO Ola Källenius is also taking into account a loss that could run into the ‘low three-digit millions of euros’. The CEO said this during a presentation in Frankfurt. He hopes the negotiators will use their ‘common sense’. Because of the aforementioned 10 percent trade tax on cars, he expects demand in the United Kingdom to decline. Daimler is not considering building a factory in England, according to Källenius. The market would be too small for that. The group is, however, considering moving production to markets that matter more. “We need to look at moving our production where it would make sense,” said the CEO. He expects the greatest growth in China in the next ten years.
Broad concerns
Earlier, the major trade associations for the European and British car industry expressed all their concerns about the breakdown of a trade agreement. British factories are facing a setback of € 52.8 billion, while European production centers are going to lose € 57.7 billion. After a short recovery from the corona crisis, the sector would be hit hard again. “Our sectors are intertwined,” said British trade association SMMT earlier. “We therefore call on all concerned to recognize the importance of the auto industry for employment and economic growth and to pull out all the stops during the negotiations.” Whether the negotiators will still be able to reach an agreement will remain to be seen in the coming months.