Motorists looking to soon replace their vehicles are being urged to fast-track purchased to before the end of the year to avoid being stung with Brexit-forced price hikes on cars.
If a trade deal can’t be struck with the EU for when the Brexit transition period ends, World Trade Organisation (WTO) tariffs of 10 per cent will be incurred on all cars imported to the country.
Consumer organisation Which? has asked a number of manufacturers if they intend to pass the higher costs onto customers, with many saying price hikes for UK drivers would be unavoidable.
This will see cars like Britain’s favourite Ford Fiesta rise by over £1,000 and a Volkswagen Golf become almost £1,400 pricier.
Car manufacturers are beginning to announce their plans in the event the UK leaves the EU without a deal at the end of the Brexit transition period on 31 December.
Manufacturers including Ford, Vauxhall, Mercedes-Benz and Peugeot have confirmed the prices of their models will rise in the event of a no-deal Brexit, while others have said they would need to ‘review their prices’.
Some manufacturers have told Which? they’re committed to honouring the price of cars bought before the end of the transition period, but which are delivered after that date.
However, this approach varies from manufacturer to manufacturer.
Ever since the referendum, the UK’s automotive trade body has repeatedly warned that failure to secure a trade-free agreement on the movement of new cars in and out of Britain will likely cause a spike in the cost of vehicles.
The Society of Motor Manufacturers and Traders (SMMT) said in 2016 that WTO rules would see the price of the average family car built in Europe and brought to the UK increase by around £1,500.
However, industry insiders have warned that the average increase is likely closer to £1,800, given the upward cost of cars in the last four years and expensive electric vehicles pushing average prices even higher.
SMMT chief executive, Mike Hawes, said: ‘We are calling for an ambitious deal with the EU that guarantees zero tariffs and quotas, and avoids other barriers to trade.
‘Such a deal would help maintain choice and affordability for drivers – and would also support our iconic automotive manufacturing industry in retaining its global competitiveness, protecting jobs across the country.’
He said last month: ‘The shock of tariffs and other trade barriers would compound the damage already dealt by a global pandemic and recession, putting businesses at risk.’
Around seven in ten cars registered in the UK are currently imported from the EU, suggesting the price hike will impact the majority of motorists.
At the moment there are no tariffs on cars imported from the EU, with the UK still following EU trade rules until the transition period ends on the last day of 2020.
If a manufacturer passed on the full 10 per cent import tariff, that would then lead to a 6.3 per cent increase in the price you pay for a car (based on average prices and according to industry body the SMMT).
Which? said the hike will impact the majority of the most popular cars bought in Britain.
For instance, a Ford Fiesta that costs £16,640 this year will be £1,048 more expensive in 2021, based on a 6.3 per cent rise.
Other cars favoured by Britons, including the bigger Ford Focus, the Vauxhall Corsa, VW Golf and Mercedes-Benz A-Class will also go up in price by between £1,000 and £1,500.
And the more premium the car, the harder customers will be hit.
For instance, the upsurge will see the likes of the £59,135 BMW X5 SUV go up by around £3,726 to £62,861.
While Which? is prompting buyers to get their orders in for new cars as soon as possible to avoid having to pay more in 2021, it has raised concerns about whether deliveries arriving after 31 December will still incur the higher costs and be subject to extended delays.
‘If you’re buying your car ahead of the 31 December transition period deadline, your dealer should know whether it’s available from stock or requires a factory order,’ the charity said.
‘If your car’s not yet in the UK, make sure you explicitly ask whether it will physically be in the country ahead of the 31 December.
‘After 31 December, if there’s a no-deal Brexit, prepare yourself for a delay before you can get your hands on your shiny new car. Should border controls change, vehicles being imported from abroad could suffer delivery delays.
‘Manufacturers will have contingency measures to mitigate this impact, but not everything can be planned for.’
Are car brands intending to increase their car prices in 2021?
BMW & MINI – UNCONFIRMED
BMW and Mini were unable to provide information on their contingency planning for the end of the Brexit transition period when quizzed by Which?.
‘We will be able to give more information when the situation regarding the final outcome of the current UK-EU negotiations and its implications for our business and our customers becomes clearer,’ the German brand said.
Mini hatchbacks and the Mini E are built in Oxford, though the majority of other models will be coming to the UK from EU nations.
FORD – LIKELY RISE
Ford has confirmed to Which? it will price protect orders placed prior to leaving the transition period without a deal, but intends to increase prices post Brexit.
Andy Barratt, Ford of Britain managing director, said: ‘In a no-deal scenario and the imposition of a WTO 10 per cent tariff regime on new vehicles, prices for Ford’s most popular passenger and commercial vehicles would rise by between £1,000 and £2,000.
‘We will provide more details if or when the situation dictates.’
HONDA – NO IMMEDIATE PRICE RISE
Honda told Which? it will price protects all orders no matter if the car is in the country and said customers won’t feel an immediate impact of tariff increases.
‘We are not immediately putting up prices after Brexit – we periodically review our prices in line with the marketplace,’ the manufacturer said.
That said, many Honda cars are imported from Japan, so are already incurring the higher tariffs today that might be reduced as part of negotiations with the UK.
JAGUAR LAND ROVER – UNCONFIRMED
Land Rover and Jaguar said it is too early for them to reveal the details of their contingency planning – they are still working through their plans in case tariffs are applied after the end of the Brexit transition period.
Many of its cars are made in Britain, but some are not.
They said they are ‘working with government’ to secure a deal that that will support consumers and their operations, which are largely based in the UK.
MAZDA – NO IMMEDIATE PRICE RISE
Like Honda, Mazda imports all its cars from Japan.
The manufacturer told Which?: ‘The UK/EU negotiations will have little direct bearing on our vehicle pricing.’
MERCEDES-BENZ – LIKELY RISE
Mercedes-Benz said: ‘Should a Government tariff become applicable at the end of the year, Mercedes-Benz will increase the price of its cars in line with that tariff.’
It added it will ‘review our pricing should a customs duty tariff become applicable on cars or parts imported into the UK’.
NISSAN – UNCONFIRMED
Which? said Nissan failed to respond to its request for information, but has previously warned that a no-deal Brexit could make its European business model unsustainable.
It said a 10 per cent export tariff applied from a no-deal exit from the EU would put its entire European operations ‘in jeopardy’.
Currently, it makes the Qashqai and Juke SUVs in the UK, along with the Leaf electric vehicle, which would – in theory – not incur any price rises for UK customers.
TOYOTA – POSSIBLE RISE FOR SOME MODELS
Toyota and its premium arm, Lexus, will apply price protection to all customers that have ordered vehicles prior to any changes to market conditions, such as a no-deal Brexit.
Fortunately, most of the Toyota range is built outside of the EU.
It said it will price protect orders of the new Yaris, which is built at a plant in France.
However, the CH-R and RAV4 SUV are built in Turkey and Russia, while the Corolla is produced in the UK at Burnaston.
VW GROUP – LIKELY RISE
Volkswagen and sister brands Audi, Seat and Skoda say they ‘may need to adjust car prices to reflect any imposed new vehicle import tariffs or in line with market conditions,’ and that they ‘continue to monitor closely all developments that may affect our operations and prepare to take appropriate action.’
The vast majority of models imported to the UK are built on the continent.