Nissan and Toyota operations in UK could be hit by new EU tariff rules, says GlobalData

Following reports that the EU has refused UK Government requests to treat imported automotive parts for UK new car manufacturing from Japan and Turkey as ‘British’ under a proposed new free trade deal;

David Leggett, Automotive Analyst at GlobalData, a leading data and analytics company, offers his view: 

“If the reports are true, this could be a serious blow for manufacturers in Britain such as Nissan and Toyota who import significant volumes of parts from so-called ‘third countries’. Even in the event of a UK-EU free trade deal being struck (still far from signed off), the problem lies in the determination of what is or is not eligible for free circulation between the UK and EU, qualifying as British (or local) content.

“Under the usual principles of bilateral free trade deals, mutual recognition and rules of origin mean that cars made in Britain need to meet around 55% ‘British’ content to count as British and avoid tariffs, but crucially, EU-sourced parts would be included in that ‘local content’ calculation. The shipments to the EU of finished new cars meeting that 55% threshold would therefore not attract tariffs under a free trade agreement (FTA).

“Many cars made in the UK and exported to the EU should be able to meet that threshold – but some may not, because of the application of rules of origin by the EU and this is where Nissan and Toyota could be especially vulnerable.

“From a UK auto industry perspective, it would be advantageous to count imported parts from Japan and Turkey, in particular, in the local content ‘cumulation’ number because of the importance to UK manufacturing of imported parts from these two countries.

“If that is not the case, Nissan could be exposed by the value of imports of parts from Japan for its Sunderland-made electric Leaf and a consequential lower level of local content. Similarly, Toyota’s UK plant works closely with Turkish suppliers. These two manufacturers could find some of their exports fall below the 55% local content threshold and therefore become liable to EU tariffs, even if a UK-EU trade deal is struck.

“Exports to Europe are vital for these two plants and attracting new tariffs of 10% on shipments to the EU would seriously hamper their competitive position.”

More Media