UK car sector warns of Brexit costs as it pushes for investment

[LONDON] Britain's car industry warned on Wednesday the Brexit trade deal will add additional costs to firms, despite the sector securing tariff-free trade with the European Union, just as it needs to pick up investment in electric vehicles.

On Dec 24, London and Brussels reached an agreement that secures zero-tariff and quota-free trade for the automotive sector, subject to vehicles containing a minimum level of parts sourced from the region.

The deal avoided any major disruption from January or a 10 per cent tariff.

But trade industry body the Society of Motor Manufacturers and Traders (SMMT) said additional bureaucracy and the need to approve vehicles separately in both the EU and Britain, among other costs, would add up.

"It can be high single-figure percentage cost to an individual manufacturer. This is not a free deal," said SMMT chief executive Mike Hawes.

"The paperwork ..., you used to do it on a minority of vehicles. Now you're doing it on just about all your vehicles, apart for those that are going to the UK market."

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Automakers will need documentation to prove vehicles meet new UK and EU content thresholds set at 55 per cent for conventional models, with a one-year grace period.

The initial local content threshold is lower for electric vehicles, set at 40 per cent, but due to rise, reflecting the high amount of battery content that comes in from Asia.

Britain and other European countries will be vying for more green investment, such as battery gigafactories, over the next decade as bans on conventional vehicles loom.

Workers on Tuesday called on French automaker PSA to build electrified vehicles at its northern English factory, in a major upcoming investment decision.

"One of the big challenges for the UK now is to... see battery manufacturing established in the UK and grow in the UK to compete with Europe, and indeed, compete more globally," said Mr Hawes.

REUTERS