The European motor vehicle manufacturing industry is highly integrated with parts produced in one country often crossing national borders multiple times before final assembly in a vehicle in a different country. The viability of production chains involving such pan-European cooperation including the UK after Brexit have long been called into doubt. As all the nation states involved in this high-tech ballet are currently in the single market and customs union, the components can be moved across Europe on a “just in time” basis without incurring any tariffs or requiring any customs inspection. It seems increasingly unlikely that the UK will be able to continue to participate in this type of assembly process once the transitional period (if agreed) ends in late 2020.
Uncertainty over Brexit and its wider economic consequence beyond the vehicle manufacturing industry together with consumer uncertainty over the future of diesel vehicles have combined to supress UK car sales for the first time in six years. According to the Society of Motor Manufacturers and Traders (SMMT), there was a 5.7% decline in new vehicle registrations over the 2016 figure at approximately 2.5 million registrations. Uncertainty over the future of diesel cars which have been linked with concerns about atmospheric pollution and human health and subjected to higher taxes, were responsible for a 17.1% decline in sales. Carbon dioxide emissions calculated for new vehicles rose for the first time in 20 years, rising by 0.8% over the 2016 figure due to the shift in the balance of sales between diesel and petrol-powered cars; diesel vehicles have better fuel consumption figures, therefore producing less CO2 per kilometre travelled than petrol powered cars.
The decline in sales is on the back of two record years for new car sales and was the sixth best figure in the history of UK car sales and the third best figure in a decade. However, SMMT chief executive, Mike Hawes, said the industry was expecting a further 5 to 7% contraction of sales in 2018.
Whilst confusion about the future of diesel cars on the grounds of pollution has led to a downturn of sales, Mr Hawes blamed uncertainty over Brexit as a contributory factor: “Undoubtedly what we’ve seen since [the 2016 referendum] is reduction in economic growth … consumer confidence indices show that people’s willingness to buy big-ticket items has declined. Exchange rates are going up, and will push up the price of cars given that 86% of cars we buy in the UK are imported and the majority of parts that go into British-built cars are also imported.”