“If there is no Brexit agreement, the impact would be 370 million for the sector,” he says in an interview at NIUS
“The main concern is that there are tariffs, but in any case we will not get better and we will only try to alleviate the step backwards”
The United Kingdom accounts for 14.2% of all Spanish automotive exports
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This black year does nothing but leave bad consequences for the second most important sector in the country’s economy, that of the automotive industry. Some negative news comes from abroad, such as Brexit (with or without agreement), whose decision is currently at its hottest.
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Automotive exports represent 16% of all national exports and that is why we wanted to have Aránzazu Mur, the director of Economy and Logistics of the Association of Manufacturers and Trucks (ANFAC), who does not hide that there is concern in the sector. “We are afraid of how it could affect the entire transport chain,” he confesses. It is not for less since only one car in four of those manufactured in Spain remains within our borders. 82% of the production is exported.
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Question: What would be the logistical consequences of a Brexit without a trade agreement? Will the borders be a chaos in the first months?
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Answer: What worries us the most is there may be a tariffIn other words, without an agreement, the regulation of the World Trade Organization would be imposed, which sets rates of 10% for passenger cars and 22% for commercial and industrial vehicles. We calculate the impact on 370 million euros per year for the sector between the tariff increase and the damages derived from all the administrative procedures in customs. The latter are already certain to occur because the United Kingdom is no longer a member of the EU. That means that it will not matter whether there is a free trade agreement or not, customs and border controls will have to be carried out when it is considered a third country. The trade agreement favors certain preferences, and of course it is very important, but already it does not eliminate the customs cost.
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P: We know that Spanish automotive exports account for 16% of all the country’s exports. And in particular with the UK?
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R: Well, it is a very important business partner for our automotive industry, in fact the third on the podium only behind Germany and France. In vehicles alone we export more than 4.6 billion euros a year to the United Kingdom. This means 14.2% of all automotive exports.
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P: And what about the imports?
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R: Well, 130,000 vehicles are brought in, compared to the 350,000 vehicles that we export. This means that we have a positive balance in terms of the trade balance between both countries, very favorable to our interests. And before the Brexit announcement there were 400,000 units, which although later fell, we were regaining market share.
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P: Is it very complex the logistics chain between both countries?
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R: Maximum. There are parts that complete complex components that even cross the border several times to one side and the other until they are finally assembled in a vehicle. And Britain was absolutely integrated into this flow.
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P: The supply of factories is complicated then …
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R: An essential flow since it works under just-in-time, that is to say, without storage of materials and components, but these are assembled and “consumed” as they are received. That process of receiving the goods, which may occur every four or five hours, could compromise manufacturing. New complexities will be created and we are afraid, of course, how all this will adapt, although we know that all factories in Spain have been working on contingency plans and preparing for what comes from January 1st. Contingency plans that, being international brands, are being worked on at a national and European level and in conjunction with logistics companies.
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P: How else could a trade agreement?
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R: In something so little known as rules of origin (the necessary criteria to determine the origin of each product and the rules established by each territory such as anti-dumping measures, labeling rules and others). Through them it is possible to ensure that vehicles can benefit from some zero tariffs or with a certain percentage. These standards set and control where the product comes from and in what proportion it comes from one country or another, since it can come from many geographical areas. Specifying these percentages makes all this new circumstance even more complex.
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P: ¿What solutions does the sector propose?
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R: It is being requested that the agreements accept percentages of reasonable tariffs. And also that they become even more flexible in electric vehicles, so as not to hinder a transition in full bloom. That is to say, that it can benefit from lower tariff payments. It is one of the details on which Foreign Trade has had the most influence, since for us access to the British market is fundamental in this section. In 2019, much less than 1% of Spanish production were electric vehicles. But so far this year I already know has increased to 4.7%, and that has been a very complicated year. And it is an unstoppable trend since the production of more vehicles and components related to electrification has already been announced. And, on the other hand, in the United Kingdom the sale of thermal cars will be banned from 2030 …
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P: Can something good come out, the reinforcement of a more efficient logistics chain that can lower prices later?
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R: It will improve the knowledge of logistics chains by manufacturers, as well as their adaptation to complex circumstances. But, Are we going to continue to have the same flow of goods with Great Britain? What circumstances will condition it? What we do see is that if an agreement is not reached, our vehicles will become more expensive. And the price rises, are we going to continue to be equally competitive to be able to be in that market that is so important to us? Will we continue to sell the same? We enter a space of uncertainty. The business relationship is going to be different. And of course we are not going to get better, although we try to alleviate it as much as possible.
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P: At what level is the Spanish logistics?
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R: Evolution is good. For example, in the World Bank’s Logistics Development Index, we have gone from being 23rd in the list of countries in 2016 to 17th in 2018. And for our sector that is transcendental since we export more than 82% of our production, and of it in turn more than 80% to Europe.
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