‘Devastating’ trade tariffs could slash automotive R&D in clean, smart tech

Extra costs of more than £3.2bn per year from World Trade Organisation tariffs could slash UK automotive R&D in clean, smart technology in a vital time for the sector.

Equivalent to almost 90% of the industry’s annual R&D spend, the tariffs on imported components and exported vehicles could result if the next government fails to agree an “ambitious” post-Brexit trade deal with the European Union, said the Society of Motor Manufacturers and Traders (SMMT).

Yesterday (26 November), the trade organisation released the figures from independent research it commissioned. Such a huge increase in costs from WTO tariffs could not be absorbed, the body said, forcing prices to rise and global demand for UK-built cars to shrink. Cutting investment would be a “tragic waste” in a time when safer, cleaner and more intelligent mobility technology is needed, the announcement said.

The analysis estimated the cumulative loss of more than 1.5m units from production volumes over the next five years, worth roughly £42.7bn at factory gate prices. Under this scenario, falling demand and model reallocation to more “competitive and welcoming” production locations would see output fall to just 1m vehicles per year by 2024.

The automotive industry exports more goods than any other sector to over 160 countries worldwide, giving an annual economic contribution of £18.6bn. Troubles for the sector could have knock-on effects for the wider economy, the SMMT said.

The trade body called for an “ambitious, world-beating Brexit trade deal to maintain the sector’s competitiveness and ability to deliver innovation, productivity and prosperity for Britain.” It urged all parties to put UK automotive at the heart of their economic and trade policies, and also called for long-term commitments to giga-scale battery manufacturing, “substantial” incentives for electric cars and infrastructure spending.

Mike Hawes, SMMT chief executive, said: “UK automotive’s needs are clear – frictionless trade free of tariffs, with regulatory alignment and continued access to talent. Detailed trade negotiations have yet to begin. They will be complex and they will take time. But a close trading relationship is essential to unlock investment so we can deliver our goals – cleaner air, zero-carbon emissions and the ability to go on building our products and marketing them globally.

“Rather than producing 2m cars a year by 2020, a no-trade-deal, WTO tariff, worst-case scenario could see us making just a million. The next government must deliver the ambition, the competitive business environment and the commitment needed to keep automotive in Britain.”