Not the BBC News

Breakdown Vehicles

CarWhat a shame that Australia isn’t a member of the EU, look what’s happened to it’s car industry – it’s gone! Ford, Holden (General Motors) and Toyota have all closed their manufacturing plants there. Ford had been manufacturing in Australia for over 70 years, GM for 50 years and Toyota for 35 years (the latter exporting over a million Aussie-made vehicles). Leaving the EU is not the only reason, and maybe not the main reason to fear losing an industry.

Vauxhall is threatening to relocate Astra production if the UK leaves the EU without a trade deal. The French group Peugeot-Citroën took over Vauxhall (from Opel (GM) in Germany) in 2017 and has plenty of spare capacity at other plants so might well consolidate production anyway, this is a normal consequence of mergers. Japanese manufacturers took advantage of the EU-Japan FTA to move production or build new models at home, free of the huge tariff barriers that used to shield EU producers. Car manufacturers are masters at extracting support from governments by threats of not investing in plants or shutting them down so this may be a ploy, an inevitable consolidation, a real response to a ‘hard’ Brexit, or all of these factors.

Johnson’s government has plans for lower corporation tax, free ports, and more. so there may be sufficient reason for UK car production to remain or even increase. It would also be possible to openly pledge subsidy. Despite Britain’s reputation for poor build quality back when BMC and Roots were indigenous manufacturers we should also recall the quality of Fiat and French cars in the same era. They survived because they were protected by their respective governments, but this can be an expensive business, it is reckoned that the Australian Government spent a dollar for every three the (foreign-owned) manufacturers spent. Still, we have McLaren, Morgan, Aston Martin (not for long, probably) and other exotic brands. JLR (owned by Tata), Nissan in Sunderland and Honda in Swindon prove that high-quality production skills exist in Britain.

South KoreaSouth Korea and the UK agreed that a new trade deal between the two countries will take effect if and when the EU-Korea FTA ceases to apply to the UK. So if the UK leaves with no deal and mutual tariffs are imposed it is likely that there will be a greater quantity of excellent quality and variety of vehicles imported from South Korea at the expense of EU exporters. Because of the risk of losing market share in Britain, the biggest market for German car exporters, some may decide to invest in the UK rather than withdraw, and with the right incentives foreign investment generally could soar. The fall in sterling makes this even more likely, it is why floating exchange rates are so important when countries face big challenges.

Remaining in the EU might delay the decay of UK car manufacturing but it won’t survive unless it is protected at taxpayer expense, or by tariff and regulation barriers which are not permitted against EU rivals while we remain, or by incentives to invest and innovate in electric cars, hydrogen cars, robot cars, flying cars or whatever captures the future market for personal transport.

 

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