A new report by the Society of Motor Manufacturers and Traders shows that the UK’s collective car repair bill could rise by more than £2 billion if tariffs and other barriers to trade are imposed.
The Importance of the Aftermarket to the UK Economy 2017, commissioned from independent consultancy Frost & Sullivan, reveals that a 2.5-4.5% World Trade Organisation (WTO) tariff on imported car parts would cost the average car owner an extra £21 a year for replacement components.
Meanwhile, quotas, subsidies, customs delays and regulatory barriers could add an additional £49, resulting in a £2.14 billion rise in the UK’s collective car maintenance bill.
Some 80% of replacement car parts fitted to British cars are imported, with almost three quarters of these coming from EU-based suppliers. However, the manufacture of components in the UK is growing, making the risk of tariffs on British products sold in Europe and other key global markets another major concern.
The report concludes that WTO tariffs on automotive parts exported from the UK could cost the domestic industry up to £3 billion in lost revenue, with a potential impact on future investment and jobs.
The report highlights the risk to an industry, which makes a significant contribution to the UK economy. In 2016 the UK automotive aftermarket sector, which includes parts makers, distributors, retailers and workshops, grew its turnover by 2.4% to £21.6 billion, while raising its contribution to the economy by 2.5% to £12.5 billion and creating an additional 1,400 extra jobs.
The total number of jobs supported by the sector now stands at some 347,000 – more than the population of Coventry.
These figures highlight the importance of the UK securing the right trading relationship with the EU. The UK and EU automotive sectors are highly integrated and any new relationship will need to address tariff and non-tariff barriers, regulatory and labour issues, all of which will take time to negotiate. Therefore, it is vital government seek an interim arrangement to avoid a ‘cliff-edge’ if a trade deal has not been finalised at the end of the negotiation process. Such an arrangement should maintain membership of the single market and customs union until a final agreement on a new relationship with the EU is negotiated and implemented.
Mike Hawes, SMMT Chief Executive, said, “This report shows just how vital the UK automotive aftermarket is to our economy and society, supporting hundreds of thousands of jobs and keeping vehicles safe – and the country moving.
“Our car maintenance sector is one of Europe’s most competitive, and motorists enjoy a great choice over where they have their cars serviced.
“However, if we don’t secure a new trading relationship with the EU that is free of tariffs and customs checks, British consumers could face significant increases to their annual car repair bill due to new tariffs and other trade barriers. Government must now prioritise an interim arrangement that maintains single market and customs union membership until the right trade deal with the EU is implemented.”
The report found the UK’s car servicing and repair sector grew again in 2016, with turnover rising 2.4% to £21.6 billion. This was driven by sustained record numbers of new car registrations, and greater reliability, leading to more vehicles remaining on British roads for longer but still requiring regular servicing and maintenance.
The increasing level of advanced technology in modern vehicles was also a major influencing factor.
Last year, UK motorists increased their spending on car maintenance by 1.7% to an average of £707. This was due, in part, to the replacement of more high tech components, which require new skills and equipment to fit.
While tyres, lubricants and filters are still the most commonly replaced items, Frost & Sullivan research shows that demand is rising fastest for telematics devices and tyre pressure monitoring sensors.
As the number and age of vehicles on UK roads increases, thanks to a strong new car market, ever-improving reliability and more advanced servicing techniques, by 2022, the UK automotive aftermarket is projected to be worth some £28 billion, with an employee base of 400,000.
The report examines other challenges and opportunities facing the sector as parts makers, sellers and fitters strive to keep pace with ever more advanced vehicle technology, data driven servicing and the changing needs of motorists.
It cites research showing consumer appetite for connected services that make it easier to maintain their cars, and identifies growing interest in emerging forms of mobility such as car sharing schemes, forecast to attract some 2.3 million members worldwide by 2025, and e-hailing.