Four weeks ago the Society of Motor Manufacturers and Traders (SMMT) stated that if there were No Deal with the EU and the UK has to trade under WTO rules then the cost of imported cars from anywhere in the World, not just the EU – would rise by 10% (average price for ICE car currently £19k = extra £1,900; average price for e-cars £30,000 = extra £2,800). Tariffs of up to 22% would be placed on vans and lorries.
If we have to Trade under WTO rules then tariffs will be applied to vehicles not only imported from the EU but from anywhere in the World: “WTO rules state that the same trading terms must be applied to all WTO members, unless, for example, there is a trade agreement between 2 or more countries. This is known as Most Favoured Nation (MFN) treatment. MFN means that the UK cannot offer better trading terms to one country and not to WTO members, unless, for example, it has a trade agreement.” (Gov.UK website ‘Trading under WTO rules’) If they do come up with some kind of Deal then, obviously, we will apply those rules instead.
Hi Georgie. I don’t dispute the technicalities of the WTO rules but my point, which I may not have made clearly enough, was that even in that scenario I just don’t see a 10% rise being automatically applied to retail prices – for the reasons I stated. The car industry would be shooting itself in the foot when it is already walking with a severe limp! They have a hell of a lot of margin (several times more than any potential tariff) to play with and will be forced to do so to remain competitive. I think that ‘project fear’ is in full swing again, this time being peddled by the motor industry as they are desperate for a deal given that imports and exports are their life blood. I understand that, but I think we have to keep in mind that even if we trade on WTO terms from January (which is still an ‘if’), it doesn’t mean that we will be doing so for ever. Negotiations will continue and deals will be found – sooner rather then later, I predict. The U.K. is often painted by the media as the ‘victim’ who will be made to ‘suffer’ as a result of Brexit, but we export almost as many cars as we import, so it’s just as much in the E.U.’s interest as it is ours to have productive trade deals.
As I said in my last post, in so far as Motability is concerned, the impact on AP’s is less clear cut. I fear that all the evidence points to the fact that they are very poor negotiators when it comes to prices paid for cars. If we believe what we are told, they pay more for thousands of cars than a private individual can easily negotiate when buying one! If they are seen as a ‘soft touch’ (which I suspect they are) then there is a danger that manufacturers may choose to recoup some of the discounts that they have to throw at private customers in our direction. However, the same rules of supply and demand apply. They have cars to shift and Motability operations are a major customer. If AP’s on some cars become uncompetitive people will either shun them and choose cars where AP’s are more competitive or will leave the scheme and source a car privately. Running a Motability car isn’t always the ‘no brainer’ that so many people think it is. In fact, more people who are in receipt of higher rate mobility PIP don’t use the scheme than do. Almost £10k of sacrificed tax free benefits plus an AP payment is quite a price to pay for ‘peace of mind’. Hopefully, if there is a short term hit to prices, Motability Operations may throw a tiny bit of their obscene levels of reserves (which, let’s face it, have come about by charging more for AP’s than they needed to) to help soften the blow to disabled customers – but then again…..!