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European car industry warns of ‘catastrophic’ no-deal Brexit

by Ace Damon
European car industry struggling

LONDON (Reuters) – Europe's leading automotive trade groups joined forces on Monday to warn of the "catastrophic" consequences of an unsettled Brexit.

European industry groups and 21 national car associations, including the British Society of Engine Manufacturers and Traders, said new car and vans tariffs could cost the EU / UK. 5.7 billion euros ($ 6.3 billion) if Britain leaves the European Union without a deal.

Consumers would face higher prices if manufacturers could not absorb the additional costs.

The United Kingdom is due to leave the EU on October 31, and British Prime Minister Boris Johnson has said he will do what he can. If the country withdraws without agreement on issues such as citizens' rights, its EU divorce project and the border between Ireland and Northern Ireland would have to be imposed tariffs governed by the World Trade Organization.

In the case of cars, the rate is 10%.

“Brexit is not just a British problem. We are all concerned about the European automotive industry and even more, ”said Christian Peugeot, chairman of the French Automobile Manufacturers Committee.

"Whether as exporters to the UK market or as local producers, which we are both, we will inevitably be negatively affected," he said.

The auto industry, including associated suppliers, is a European success story, producing just over 19 million vehicles a year and employing nearly 14 million people.

While Britain is a major importer of European cars, Britain has seen its automotive industry go from strength to strength in recent decades. Manufacturers around the world, including Japan's Honda and Nissan, use it as a base for sale across the EU.

Key to the industry's success in recent years has been the ability of companies to operate and search directly in the EU single market – the so-called just-in-time operating model.

If Britain withdraws without a deal, companies will not be able to operate in the single market as they have become accustomed. It would not just be about tariffs; Other requirements, such as the need to comply with customs regulations, would delay business, raising serious questions about the viability of just-in-time operations.

Automotive industry groups say the cost of just one minute of production shutdown in the UK is 54,700 euros ($ 60,000).

Faced with recent winds, several companies said they could switch production in the case of a Brexit without agreement.

"A Brexit without agreement would have an immediate and devastating impact on the industry, undermining competitiveness and causing serious and irreversible damage," said Mike Hawes, executive director of the British auto association SMMT.

Even Brexit's most passionate supporters say that an out-of-agreement exit would cause interruptions, at least in the short term. However, they argue that in the long run, the UK economy would be able to thrive as the political structure was adjusted and a greater focus on fast-growing economies pursued.

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