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Fleet decision-makers and the leasing industry is bracing itself for a price hike on new company car and van orders in the event of a ‘no deal’ Brexit.
However, in a note from BMW, seen by Fleet News, the German manufacturer has announced a customs duty related increase of more than £3,000 on the recommended retail pricing (RRP) of the BMW i3, irrespective of whether there is a free trade deal or not.
BMW had announced at the beginning of October that BMW i3 models, along with the majority of other BMW models, would be subject to an “economic increase” in the recommended retail price rise from January 1, 2021.
Due to changes in the ‘Product Specific Rules of Origin’ legislation, it says that the maximum permitted content of non-EU and non-UK materials means these models will be subject to additional tariffs after the end of the Brexit transition period.
This will be the case, it adds, “whether or not there is a free trade agreement with the EU”, which means a further increase in the RRP of BMW i3 models is needed.
The current RRP for a BMW i3 (ZI3I), valid until December 31, is £35,120 – the previously announced RRP, to be effective from January 1, was £35,670. However, BMW says that the new RRP from January will now be £38,785 – an increase of more than £3,600.
Similarly, the current RRP for a BMW i3 (ZI3J), valid until December 31, is £37,650 – the previously announced RRP, to be effective from January 1, was £38,200. However, BMW says that the new RRP from January will now be £41,315 – again an increase of more than £3,600.
It says that for Direct Sales Agency Agreement vehicles, orders registered on or before December 31 will be charged the pricing valid on the date of order.
Meanwhile orders registered on or after January 1 will be charged as follows:
Vehicles which arrive in the UK on or before December 31 and which are marked sold on or before December 31 will be charged the pricing valid on the date of order as the vehicle will not incur additional import charges. Vehicles must be registered by April 30, 2021, to benefit from this pricing.
Vehicles which arrive in the UK on or after January 1, regardless of the date of order, or which are marked sold on or after January 1, will be charged at the new price, incorporating the customs duty increase and are not price protected.
BMW’s price hike comes after Renault issued its own price warning ahead of a free trade agreement not being reached.In a letter from Renault’s fleet director, Mark Dickens, to customers, he says that the manufacturer has been in discussions with our factories to secure “increased production of vehicles and parts” to mitigate any risk of disruption to supply at the UK-EU border.
In addition, he said that Renault has increased capacity and staffing to ensure the “timely delivery of vehicles, parts and accessories to our customers”.
Any customer order created up to and including October 31, 2020, will be price protected regardless of the importation date, he says.
Any order placed from November 1 onwards, and that is matched to a vehicle imported from January 1, however, could be subject to revised pricing based on the imposition of vehicle tariffs.
In the event that tariffs apply on import, Renault says that those will be as per World Trade Organisation (WTO) terms, and will be added to the order price. Tariffs on WTO terms equate to 10% of the total new vehicle price including options.
Furthermore, it says any vehicle imported from January 1, ordered from November 1, could be subject to revised pricing based on the imposition of vehicle tariffs.
Finally, it says that any customer order created from January 1 would be subject to any new pricing irrespective of vehicle importation date.
Dickens wrote: “We will continue to closely monitor events and will keep you informed of any developments.”
Fleet News reported last month, how manufacturers had written to leasing companies warning them that they cannot guarantee company car prices beyond the end of the year, even for some models being ordered now.
In letters sent to vehicle lease provides by major carmakers, including BMW, Jaguar Land Rover and Mercedes-Benz, they say that the threat of a ‘no deal’ Brexit was to blame for the potential price hike.
Talks between the UK and EU are due to resume today (Monday, November 16) in Brussels. The UK’s chief negotiator, Lord David Frost, arrived in the city, tweeting that there had been “some progress in a positive direction in recent days”.
But he said “significant elements” of the deal are yet to be agreed, adding: “We may not succeed.”
Any deal between the UK and EU would need to be ratified by parliaments on both sides, so time is running out for an agreement to be reached and to get the sign off before December 31.
Residual Value Concerns
A senior manager working at an FN50 vehicle leasing company, said the lack of clarity around pricing was a big issue for the industry.
He said: “Our view is that we should be advising clients to hold back on orders unless they choose from the manufacturers that have said they will honour prices.”
He envisages a number of cancellations from customers where any price protection doesn’t apply.
Furthermore, in terms of future residual values, he said they were in a state of “limbo”.
“There is an argument that they should increase proportionately to the increase in new vehicle prices,” he said, “but that would only be if we expected that the used market increases in value proportionately in three years’ time.
“There is an argument for that, but the future used values would then be increasing in value because of a one-off tariff that is being imposed rather than anything that relates to enhanced value.
“Such increases may be correct when looking at the actual price values of new vehicles, but it is also a value based on the future value prediction of a tax, which doesn’t feel quite right either.”
He continued: “If the tariff was imposed for just an – undetermined – period of time, and then taken away, what would happen to used car prices? Will they also increase now for a while and the turn back or will they stay at the higher value? Will future residual values also rise and then fall again in that scenario?
“In essence, the uncertainty will show through in the new car and used car market we believe and cause a de-stabilising effect. This is never good news for anyone in the automotive sector.”
‘Costly’ Brexit Preparations
The Society of Motor Manufacturers and Traders (SMMT) has revealed the cost to the sector of preparing for Brexit has surpassed £735 million, with more than £235 million spent in 2020 alone.
Most companies (67%) across the industry say they are doing everything in their control to prepare for new processes that will come into play on January 1, with 70% securing GB Economic Operators Registration and Identification (EORI) numbers, 60% spending significantly on stockpiling and 52% employing customs agents, as companies also try to prepare for any disruption or delay to supply chains.
However, significant gaps in the industry’s ability to plan still exist, with a lack of clarity on the nature of the UK-EU’s future relationship hampering the efforts of almost nine in 10 (86%) firms to prepare.
Critical questions remain unanswered. With the industry’s competitiveness built on Just-in-Time deliveries, companies cannot afford any supply chain delays so clarity on the operation of key new customs systems such as the Goods Vehicle Movement Service (GVMS) and the Permission to Progress (P2P) process, is vital, says SMMT.
Moreover, even if the UK and EU do conclude a Free Trade Agreement (FTA) from the end of 2020, there is uncertainty as to how companies will prove origin or products; if firms cannot do this then they will not be able to benefit from preferential trading terms.
Mike Hawes, SMMT chief executive, said, “As the UK-EU FTA negotiations enter the endgame, now is the time for both sides to deliver on promises to safeguard the automotive industry.
“Securing a deal is absolutely critical but it cannot be any deal. To work for UK automotive it must deliver for UK products and that means securing the right terms and conditions that allow our exports – now and in the future – to be zero tariff and zero quota trade. A deal that failed to achieve this would be the equivalent to no deal at all, devastating jobs and slamming the brakes on the UK’s ambitions to be a world leading manufacturer and market for electrified mobility and battery technologies.”
The only person who got all his work done by Friday was Robinson Crusoe.
Anything i post over three lines long please assume it is an article lol.
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Wonder how long it will be till the brexiteers finally reaLIES that they’ve been fobbed off
I’m sorry, but your remainer attitude is wrong.
We now have the ability to trade worldwide without being shackled to the EU and particularly Germany abd France’s protectionism.
Tge Irish border is exactly tgat, a border between the United Kingdom and the Irish Republuc, so the same passport requirements as with France and the Netherlands is the same.
we were never in the Shenegan agreement, so again, nothing gas changed. We will face an agreement with the Irish republic.
our trading area is now bigger. Embrace the future, stop trying to sell your country to foreign piwers
We have always Traded throughout the world. We were always free to make Trade Deals with non-EU countries. We were always free to sell as much as we wanted to sell to non-EU countries.
Northern Ireland isn’t part of the Irish Republic, it is a part of the United Kingdom. Until Brexit mainland Britain had frictionless trade with Northern Ireland – Now we don’t. We didn’t need passports to visit Northern Ireland – Now we do. We didn’t need to fill in a ton of paperwork to transport goods to and from Northern Ireland – Now we do. We have practically handed Northern Ireland over to the EU. EVERYTHING HAS CHANGED.
No, we have never been part of the Schengen zone. We exercised our sovereign right to not become a port of it. Gibraltar was also never part of the Schengen zone – until now. Brexit has made it practically impossible for our BRITISH Overseas Territory to function without becoming a member. Brexit has forced Gibraltar to join. ALL Schengen members can travel to Gib. without going through Customs, British visitors can’t. EVERYTHING HAS CHANGED.
In what sense is our Trading Area bigger than it was when we were in the EU? Has the Earth suddenly expanded? Have you discovered some new countries?
As for selling our country to foreign powers – Why do you think we waited to the last minute to made a Deal with the EU? It was because Boris was hoping his pal Thump would win his appeal and somehow be reinstated as POTUS. Then we could have had a lovely Free Trade Deal with the USA that would have swamped us with cheap American foodstuff – steroid-injected beef and disease-riddled chickens for us while we continue exporting our top quality food to the EU. It may yet happen. Wealthy countries love making Trade Deals with poorer countries (Britain has just been overtaken by India in the ‘strongest economies’ Rich List) – especially when they’re clearly desperate.
Fishermen sold out, NI sold out. We traded with the rest of the world anyway, just it was easier in the huge bloc that is the EU. We have lost free movement of labour. Try asking yourself why Switzerland just voted for it and the US has mass immigration? It’s because we got the brightest and the best of the EU’s young people coming here and working. Guess what, their productivity is better than ours. They are an economic advantage we have just lost. Coming from a European culture too, they integrate very well.
Tired old badly educated Brits couldn’t hack it so blame the immigrants. If you don’t understand economics you shouldn’t post on the subject.
There is an argument for Brexit, but it has nothing to do with economics. Shackled by the EU. Ask yourself how daft that sounds. Has the German economy been shackled by the EU, has the French motor industry been shackled by the EU, why does every developing country in Europe and the Turkish empire dream of EU membership. Economically we are certain to be worse off. If you are selflessly promoting the virtues of sacrifice for future generations good for you. But as the noted economist Keynes said, ‘In the long term we are all dead’ No one would have voted for Brexit if the truth about an economic hit was told. That’s not to say you can’t want Brexit for other reasons, but it’s dishonest to make believe it has anything to do with economic prosperity. The mere fact of ending freedom of movement…for whatever reason…will damage us economically. If it wasn’t for immigrants here the economy would be in a very poor state. It is an absolute fact. Repeat fact accepted by even the Brexiteers that immigrants from the EU contribute more than they cost. They are young and fit and hungry for work. As Conservative HQ was forced to concede during the election.
Brexit is been and done. Judge it when we are asking to come back in the EU as our trade deteriorates and we are once again the ‘sick man of Europe’
oh give it a rest, i am sick to death of peope whining about brexit, the people voted the majority wanted out thats it make the most of it.
the french and germans want a federal europe on their terms. they have always rigged the playing field to suit themselves particularly the french. they subsidise their industries etc in contravention of the rules then amend the rules to suit themselves. the cap was invented to bail out french farmers and led to wine lakes and butter mountains etc all instigated by the french who threw a wobbly when the rest tried to rein it in.
sorry but the eu aint all its cracked up to be. it was supposed to be a common market to aid trade but morphed into the monster it is now maybe our leaving will get it to reform.
I’m not going to waste any more time with it. The Deed is done and now we have to live with the consequences.
Happy New Year!
Indeed we will have to live with the consquences, the average Brit will be alot poorer many many years to come all because of the foolishness of the leavers
If you don’t like it then go live in the EU, you’ve had that option for years.
But whatever you do, don’t keep on whining & insulting people.
There is a lot of dealing between Europe and the United Kingdom, which won’t replace overnight. If there is no trade deal, it could mean higher prices in United Kingdom shops. There could also be loitering as lorries bringing products would need even more border checks. Brexit supporters say leaving Europe will give the United Kingdom more freedom to strike trade give out around the world.
Visit: https://theangeltrust.com/impacts-of-brexit-on-trusts-and-tax-policies/
Very true Wigwam, a deal has been worked out.
remember tgat we are a net importer of goods from the EU, as successive governments have failed to secure British jobs, unlike Germany and France.
The EU needs to have a trade deal for what is their larges non EU country, that’s why a deal was done
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