EU-built cars set to be 10% more expensive after Brexit

  • New import duty likely to be passed on to car buyers
  • Average price increase set to be around £1,500
  • Non-EU cars could become cheaper longer-term

While it might be a welcome break from Coronavirus-related news, it’s out of the frying pan and into the Brexit fire with confirmation that cars imported from the European Union are to be 10% more expensive from 1 January 2021.

Currently, cars manufactured in the EU are imported into the UK duty-free.

Land Rover Defender - built in the EU

There are still a lot of ifs and buts to be negotiated between the UK government and the EU before the end of 2020, but Liz Truss, the trade secretary, has confirmed the 10% tariff will be applied if no trade deal is reached by the 31 December deadline and Britain moves to a World Trade Organization (WTO) set of rules.

This is the likely scenario if a Free Trade Agreement (FTA) between the UK and EU is not agreed, or if there’s a further extension of the Brexit transition period due to external influences, such as the COVID-19 pandemic.

Will this make cars more expensive?

As it’s very unlikely that car manufacturers importing models into the UK from the EU will foot that 10% increase, then yes, we expect the majority – if not all – of that cost to be passed on to British car buyers.

Back in 2016 the Society of Motor Manufacturers and Traders (SMMT) suggested that without an FTA, the average price of an imported car into the UK could rise by £1,500.

A 10% increase would see a popular French-built small hatch increase from £15,000 to £16,500, while a typical German-made compact family SUV would rise from £25,000 to £27,500.

Vauxhall's Astra is built in the UK...

This WTO-aligned tariff would also mean that a car manufactured in the EU for a British brand would also be 10% more expensive.

Jaguar Land Rover's EU-built models - the I-Pace is assembled in Austria, the Defender and Discovery in Slovakia - would be subjected to the same 10% increase, although a statement from a company spokesperson remains upbeat: 'We continue to work with government to acheve an ambitious free trade agreement with the EU, which will remain one of JLR's most important trading partners.'

Where the industry is also negotiating with the UK government and the EU is over ‘rules of origin’ – in other words, what percentage of a car must be manufactured in Britain for it to be exempt from the 10% import duty and vice vsersa.

Many UK-assembled cars contain all manner of major components, from bodywork, engines, battery packs, transmissions and electronics that are sourced from EU-based suppliers. If the vast majority of a car’s components are supplied from the EU, it’s unlikely to be regarded as British simply because the final assembly takes place here. Those precise percentages, based on component value, are yet to be determined.

On the other hand, where car companies have manufacturing bases in the UK already, it could prove prudent to shift production of key EU-built models to Britain to avoid those duties on popular models and emphasise the fact that they've been produced locally.

Is it all bad news?

Well, it’s not looking rosy right now, but there is still time for a deal to be struck.

Even if there isn’t a cordial FTA with the EU, Britain would be free to negotiate alone to create low- or no-tariff arrangements with other large car-building nations such as the USA, Japan, South Korea and China.

Of course, as we have already witnessed with the Brexit negotiations, such agreements aren’t the work of a moment, so even if FTAs can be struck with other nations that result in cheaper cars, the benefits are unlikely to be experienced until 2022 at the earliest.

...but the Vauxhall Corsa is built in the EU

Other items are set to become duty-free under the WTO rules, including various white goods such as fridge-freezers and washing machines, plus sanitary products, but like cars, many imported foodstuff would be subjected to the increase.

Keep this page bookmarked for updates to this story over the coming weeks and months leading up to the UK exiting the European Union

Further reading

>> Check out Parkers’ COVID-19 guide to car ownership

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