Ahead of the EU-Brexit summit this weekend, European automobile manufacturers and suppliers have sounded the alarm over the potential damage that Brexit could do to the competitiveness of their industry, which represents 6.5% of EU’s GDP and provides employment to some 12.2 million Europeans across the continent.
Acea, the European automotive manufacturers’ association, noted that automotive manufacturing is a ‘highly complex industry’. A single vehicle part may be composed of over 30 components, it points out, and undergo over one hundred process steps to become a finished product. It may pass through 15 countries, and cross borders multiple times in its material journey. A single vehicle, in turn, consists of around 30,000 parts, ACEA says.
Vehicle manufacturers currently operate some 300 assembly and production plants in Europe. They often manufacture engines or transmissions in one country and assemble the final vehicle in another. The European Single Market ‘provides for a high level of economic and regulatory integration in this respect’. This level of integration, ACEA says, is reflected in how the automotive industry has strategically set up its business operations in terms of supply chains, production sites and distribution networks.
ACEA also points out that the EU is the UK’s biggest trade partner. More than half of all the cars and 90% of all the commerical vehicles built in the UK last year were bought by customers in Europe. The other way around, the EU represents more than 80% of the UK’s motor vehicle import volume, worth EUR42bn. Seven out of every 10 new cars sold in the UK come from EU plants.
Addressing journalists at a press conference, Erik Jonnaert, Secretary General of ACEA said: “Today, the automotive industries of the European Union and the United Kingdom are closely integrated; from the economic, regulatory and technical points of view. Any changes to this level of integration will most certainly have an adverse impact on automobile manufacturers with operations in the EU or the UK, as well as on the European economy in general.”
ACEA maintains that the adverse impact would potentially be felt in a number of areas, including tariffs, customs procedures, the regulatory framework, and access to labour. Tariffs, for instance, could amount to 10% for passenger cars, 10 to 22% for commercial vehicles, and 3 to 4% on average for parts and components.
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Sigrid de Vries, Secretary General, European Association of Automotive Suppliers (CLEPA) also highlighted the benefits of the EU Single Market for business competitiveness: “The EU Single Market represents a fundamental driver of global competitiveness. Vehicle manufacturers and component suppliers are entangled in a highly integrated manufacturing network spanning Europe. Tariff- and burden-free market access, as well as a stable and predictable regulatory framework, are crucial instruments to sustain the supplier industry’s technology leadership and secure investments and jobs.”
EU leaders, minus Britain, are meeting in Brussels on Saturday to sign off on an opening negotiating position for the bloc ahead of negotiations on the UK’s Brexit terms that are expected to begin in earnest after the UK’s June 8 general election. The UK will formally leave the EU in March 2019.