European Automakers to Mull EU Future Without U.K.

LONDON – The main group representing European automakers is sounding the alarm over trade risks it says the continent faces after the U.K. exits the European Union.

In calling an EU-Brexit summit this weekend, ACEA, the European automobile manufacturers’ association, cites concern over the potential damage Brexit could do to the competitiveness of its industry, which represents 6.5% of EU’s GDP and employs some 12.2 million Europeans.

ACEA, representing 15 Europe-based car, van, truck and bus manufacturers, points to the complex nature of vehicle manufacturing where a single vehicle part may comprise more than 30 components and undergo more than 100 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 about 30,000 parts.

Vehicle manufacturers 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 is reflected in how the automotive industry has strategically set up its business operations in terms of supply chains, production sites and distribution networks.

The EU is the U.K.’s biggest trade partner. European customers bought more than half of all the cars and 90% of all the commercial vehicles built in the U.K. last year. On the other hand, the EU represents more than 80% of the U.K.’s motor-vehicle import volume, worth €42 billion ($46 billion). Seven out of every 10 new cars sold in the U.K. come from EU plants.

“Today, the automotive industries of the European Union and the United Kingdom are closely integrated, from the economic, regulatory and technical points of view,” Erik Jonnaert, secretary general of the ACEA, says at a Brussels press conference. “Any changes to this level of integration will most certainly have an adverse impact on automobile manufacturers with operations in the EU or the U.K., as well as on the European economy in general.”

This impact potentially would be felt in a number of areas, including tariffs, customs procedures, the regulatory framework and access to labor. 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.

Sigrid de Vries, secretary general-European Association of Automotive Suppliers, adds: “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.”