Welcome news for the car industry in the United Kingdom is Toyota’s decision to invest £240 million in their operations in the UK. This decision comes when there is major uncertainty in the car industry with the UK due to leave the EU.
With Brexit on everyone’s tongues right now, trading arrangements with Europe and the world are unknown, which has led to a lot of uncertainty in the car industry this year. The car industry is expecting major cuts in the coming year, which is why it’s uncertain as to why Toyota has made such a large investment into their UK operations. The question on everyone’s lips is what form of guarantee does this Japanese car maker have from the UK government.
There is also questions on whether Toyota has assurances that may have resulted in Nissan deciding to build new models in Sunderland. The UK has been an important part in Toyota operations for a quarter of a century with the Burnaston plant being their first facility in Europe that manufactured cars.
It was the Burnaston manufacturing facility that produced the Carina E in 1992 which was the first vehicle off their production line. The company has produced over four million cars in over twenty five years, many of which have been exported to Europe and other countries around the globe.
Burnaston manufacturing facility is now home to the biggest selling British made car in the world, the Toyota Auris. They also manufacture the Avensis, there were one hundred and eighty thousand vehicles produced in this facility alone last year.
One thing is clear with the new investment is that Toyota remains positive that the UK will remain one of their top manufacturing plants, as they take on upgrading the plant to the Toyota New global Architecture, a new system being used in the production of their vehicles throughout the world.
Impact of Brexit
The question on everyone’s lips is how Brexit is going to impact the car industry in the United Kingdom, which comes with a host of custom arrangements and complex tariffs, which questions why Toyota has just made such a large investment at a time of such uncertainty.
The customs and tariff changes could threaten how car makers remain competitive, especially for those who rely on manufacturing pioneered by Toyota. Another concern for the industry is how investment is going to be impacted when Brexit is introduced.
SMMT, an industry trade body announced in January that there was committed investment in the car industry in the UK of £1.66 billion in 2016 which was a decline by £2.5 billion which was given the year before. This is a sizeable drop, which could drop significantly once Brexit is introduced.
The UK wants tariff free access to markets in the European Union and reverting to the World Trade Organisation rules which are ten percent standard tariffs on vehicles exported in and out of the EU could cause the industry to take a sizeable knock in the long run, maybe even result in some of the leading manufacturers pulling out of the UK completely.
Imported cars could result in an additional £1,500 being added to the price, which could push them out of the market and see a decline in the number of new purchasers of these vehicles. This could result in £4.5 billion in costs to consumers and the industry with £2.7 billion being added to imports and £1.8 billion being charged on exports.
Nissan driving forward
Nissan agreed to expand their UK production in October announcing that they would be manufacturing two new models in Sunderland after they had received assurances and support from the government. The new models was the Qashqai and the X-Trail, a SUV. Nissan has confirmed that they will revisit the situation once Brexit has been concluded. The assurances came from the Business Secretary, but have never been published.
The Business Secretary did confirm that the letter confirmed commitments in making funds available for supporting research and development and training in the United Kingdom to help the car industry remain competitive. The letter also confirmed that the UK will try and maintain a tariff free trade with the EU after Brexit has been concluded.
Toyota and other car makers want what has been promised in the letter which ensures assurances and support from the government in the long run. Toyota’s European boss has advised that Brexit should result in seamless trade between the UK and the EU without unwelcome tariffs and fair regulatory standards.