European-built cars imported to the UK from 2021 are set to become around £1,500 more expensive after the government confirmed that these vehicles would be subject to a 10 per cent tariff from 1 January.
The Department for International Trade today announced its post-Brexit tariff regime, which will see cars built in EU countries subject to the same 10 per cent levy as those arriving from other nations.
The move would hit some of Britain’s most popular cars, including British best sellers the Ford Fiesta, VW Golf and Mercedes-Benz A-Class.
This will be the case unless the Government negotiates a free trade agreement (FTA) with the EU between now and the end of the Brexit transition period, which is due to terminate on 31 December 2020.
European-built cars to become more expensive: The government today announced its post-Brexit tariff regime, which will see cars built in EU countries subject to a 10% tariff
Failure to secure an FTA means the UK will default to World Trade Organisation (WTO) terms on 1 January 2021, according to the UK Global Tariff document published on Tuesday,
This will end the zero per cent tariff on cars imported from EU nations and replace it with a 10 per cent levy.
Experts have already warned that in most cases the additional cost of tariffs will likely be passed on to British car buyers rather than absorbed by the manufacturers themselves.
The Society of Motor Manufacturers and Traders (SMMT) previously estimated that a 10 per cent import levy could add £1,500 to the price of an average new car shipped from Europe to the UK.
Commenting back in 2016, the trade body said: ‘Import tariffs alone could push up the list price of cars imported to the UK from the continent by an average of £1,500 if brands and their retail networks were unable to absorb these additional costs.’
The SMMT has warned that car manufacturers are unlikely to absorb the levy and instead pass the costs on to British buyers, which will see the average new car built in Europe become £1,500 more expensive
Of the 1.3 million cars built in the UK last year, 81 per cent were exported, SMMT figures show
While the tariff hike will be a blow for European makers who sell millions of cars to UK customers each year, the move is seen as a vital step to protect UK manufacturing.
Official figures for 2019 show that 2.3 million new cars were registered in the UK last year.
SMMT figures for last year show that 2.3million cars were registered in the UK last year
Of these 2.3m cars registered, fewer than 250,000 were likely built in the UK, with just 19 per cent of the 1.3m vehicles produced in British factories in 2019 made for the home market
Manufacturing data for the same period says that just 1.3 million motors were produced by British factories, of which 81 per cent were exported.
That means fewer than 250,000 of the cars build in Britain last year were bought by drivers on home soil.
It hints that more than 90 per cent of new models registered to private UK buyers, fleets and businesses were imported from other countries, most likely from Europe.
For instance, the Ford Fiesta, the UK’s most popular new car for the last 11 years, is produced at the manufacturer’s plant in Cologne, Germany.
Other examples include the Volkswagen Golf (produced in Wolfsburg, Zwickau and Dresden Germany), Mercedes-Benz A-Class (built in Rastatt, Germany; Kecskemet, Hungary; Uusikaupunki, Finland) and Kia Sportage (made in Zilina, Slovakia).
The Ford Fiesta, the UK’s most popular new car in 2019 and for the last 11 years, is produced at the manufacturer’s plant in Cologne, Germany
The UK’s second most-bought new car is the VW Golf, which is also produced in Germany
Other models in the top 10 best sellers in the UK last year include the Mercedes-Benz A-Class (left), which is built in factories in Germany, Hungary and Finland, and the Kia Sportage (right) made in Zilina, Slovakia
A potential trade agreement with Brussels could be reduced or scrapped entirely before the transition period ends, but it’s understood that progress on negotiations are slow.
The UK Global Tariff document suggests that imported motors made outside of Europe will be largely unaffected and continue to levied 10 per cent as they are currently.
However, individual trade deals with other nations – such as Japan and the US – could see these tariffs reduced.
The document revealed that while European cars are looking likely to become more expensive, the government is removing tariffs on £30 billion worth of other imported household items.
This includes white goods such as dishwashers and freezers, sanitary products, cooking ingredients and even Christmas trees.
Today we are announcing the new UK Global Tariff that will come into force on 1 January 2021. It will mean:
✅ Lower costs for consumers
✅ Cutting red tape and complexity for business
✅ Tariff regime suited to ���� economy��https://t.co/FBQ9LHdxUA— Liz Truss (@trussliz) May 19, 2020
Liz Truss, Secretary of State for International Trade, said: ‘For the first time in 50 years we are able to set our own tariff regime that is tailored to the UK economy.
‘Our new Global Tariff will benefit UK consumers and households by cutting red tape and reducing the cost of thousands of everyday products.
‘With this straightforward approach, we are backing UK industry and helping businesses overcome the unprecedented economic challenges posed by Coronavirus.’
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