The production of automobiles in Europe is heavily integrated and makes use of both the single market and customs union to allow components to be made in one country and shipped to another for final assembly (indeed some components cross international borders numerous times before being incorporated in the final product which may itself be then exported to be sold in the market of another country). The single market and customs harmonisation allow manufactures to use “just in time” solutions for components supply which averts the need for them to keep such items stockpiled which is not as economically efficient.
Brexit, particularly a “no deal”, threatens to impose customs inspections and the application of tariffs on car component movements and on the finished product. Under WTO rules, a car produced outside of the single market would see the imposition of a 10% charge – this could not be waived without doing so for imports of all cars from the rest of the world too.
Nissan Europe has warned that a “no deal” Brexit could render its European business model unsustainable. Gianluca de Ficchy, the company’s European chairman, warned that its "entire business model for Nissan Europe will be in jeopardy" in a “no deal” exit.
In an interview with the BBC, Mr de Ficchy noted: "We do not know still what a no-deal means. There are many alternatives, and today there is a lot of uncertainty. The only message I can [give] is that if a no-deal will be associated with the application of 10% duties under the WTO rules, that will create an enormous problem for the overall European activities of Nissan Europe. If we will have to sustain 10% export duties on the vehicles that we export from UK to EU, knowing that those vehicles represent 70% of total production, the overall business model won't be sustainable. It's not a question of Sunderland, it's a question of the overall economic sustainability of our business [in Europe]."
The Nissan plant in Sunderland is the largest UK car exporter with 80% of its output being exported. The plant directly employs 7000 people.
He made a plea: "We are asking not to have tariffs being applied in a no-deal scenario because otherwise the tariffs won't be sustainable for us”, but for the reasons outlined above, this is not in the gift of either the EU or the UK.