The latest on EU Exit
After a period of protracted negotiation, the British government has agreed a trade deal with the European Union. This means that, when the transition period ends at 11pm on 31 December 2020, the country will complete its departure from the EU while avoiding the prospect of a no-deal Brexit.
This is a positive outcome. As LeasePlan and the wider leasing industry have long argued, a no-deal Brexit would have been bad for fleets and motorists – not least because it would have resulted in import tariffs and delivery delays for new vehicles. There will now be no tariffs to be passed on to consumers in the form of higher list prices.
However, it should be emphasised that not all of the challenges have been overcome. The up-to-the-wire nature of these negotiations means that the economy will now face a period of adjustment, away from planning for the worst and towards accommodating the deal as it is.
And we all still need to sift through that deal – all 1,246 pages of it – to figure out what it really contains.
What does the motor industry think about the deal?
A summary of opinions from across the motor industry can be found below.
“Today’s announcement is a positive outcome.
As we navigate ourselves through this period, we are committed to keeping our customers updated with the latest developments. We will continue to provide businesses and fleet managers with safe and efficient mobility solutions, while empowering them with the tools they need to enable a smooth and successful transition to a low carbon fleet in time for the 2030 deadline.”
[Alfonso Martinez, Managing Director, LeasePlan UK]
“This EU trade deal comes as a big relief and will provide a welcome boost to the UK automotive sector, which can now plan for 2021 and beyond with more certainty.
“Avoiding tariffs on vehicles and parts is essential, but with the end of the transition period only days away, there is still a lot to be done to prepare for January and beyond as details around the new trading terms become clearer”
[Gerry Kearney, Chief Executive, BVRLA]
“The deal provides a platform for our future relationship.”
“We await the details to ensure this deal works for all automotive goods and technologies, including specifics on rules of origin and future regulatory co-operation. A phase-in period is critical to help businesses on both sides adapt and efforts should now be sustained to ensure seamless implementation, with tariff-free trade fully accessible and effective for all from day one.
“We will continue to work closely with government to ensure all companies are as prepared as possible in the limited time left.”
[Mike Hawes, Chief Executive, SMMT]
The European Automobile Manufacturers’ Association (ACEA)
“There is no other industry that is more closely integrated than the European automotive industry, with complex supply chains stretching right across the region,”
“Major challenges still lie ahead, as trade in goods will be heavily impacted by barriers to trade in the form of new customs procedures that will be introduced on 1 January 2021.”
[Eric-Mark Huitema, Director General, ACEA]
The general situation
When will the UK leave the European Union?
The UK technically left the EU on 31 January 2020. However, a transition period began on 1 February 2020, during which many of the previous rules and arrangements will remain in place whilst the UK government and European leaders negotiated a new trade deal. The transition period is due to end on 31 December 2020.
Has the UK government secured a trade deal with the European Union?
Yes, although the deal still requires ratification by the UK parliament and the 27 EU member states – but there is no longer the fear of a ‘no-deal’ scenario.
Tariffs and costs
Will vehicles face tariffs now?
New cars and vans imported from the EU face a 0% tariff – that is, no tariff at all.
Will ‘rules of origin’ apply?
- Internal Combustion Engine (ICE) vehicles need to be made with at least 55% local content to avoid tariffs.
- Electric vehicles and hybrids will need 40% local content.
- Until 2023, batteries can have as much as 70% overseas content, and EVs and hybrids can have as much as 60% foreign content.
- From 2024 to 2026 (when European battery production is expected to be more advanced) batteries can have 50% overseas content and EVs and hybrids 55% foreign content.
Will there be tariffs on parts?
UK Goods and Components will be sold without tariffs, and without quotas in the EU market.
How many vehicles come from the EU?
According to a recent BVRLA bulletin, about 72% of fleet cars and 68% of vans are sourced from the EU.
Could the new deal still result in higher vehicle leasing costs?
We are still working through the details, but if you are a LeasePlan customer, you will be contacted in advance of any price changes to help you make the most informed decision.
What about tariffs on electric vehicles?
The EU agreed to allow an exemption for electric cars, but only for six years.
This means that European carmakers have until 2026 to switch their battery supply chain from East Asia to Europe. Otherwise, the 10% tariffs will begin to apply on electric car sales from the UK to EU and from EU to UK if the EV is made from more than 55% components of non-European origin.
Will delivery dates for new vehicle orders be affected?
There is a chance that any vehicles delivered on or after 1 January 2021 could be held up at the docks, as borders may not be running as efficiently. Even if your car is 100% made in Britain, it is likely to need parts from elsewhere in the world, which could take longer to get here.
Some manufacturers have been working to get ahead of this challenge by stocking up on vehicles, parts or bringing forward their summer maintenance shutdown, which may affect the timings for some new cars. If your car is already in the UK, there is less chance of a delay.
If you are a LeasePlan driver with a vehicle on order, you will be kept informed about your expected vehicle delivery date.
Will vehicle service, repairs or tyre replacements be impacted?
There is a chance that supply of goods and parts into the country may be delayed – as borders may not be running as efficiently. Suppliers have been working to get ahead of this challenge by stocking up on vehicle parts to mitigate the risk of any delays in getting vehicles back on the road.
If you are a LeasePlan driver, please contact the LeasePlan DriverLine, which will keep you informed every step of the way.
Will I need extra documents to take my vehicle abroad?
The deal means that you will not need an international driving permit, as was previously suggested – however you will require a ‘green card’ from your insurer certifying in multiple languages that the vehicle is adequately insured.
If you are a LeasePlan driver, please contact the LeasePlan DriverLine, and they will provide you with a VE103(a) Vehicle on Hire Form and a Letter of Authority. If you have roadside assistance you will also be sent details of your European Insurance Cover.
What has been agreed around climate targets?
The new agreement also includes continued co-operation on issues including climate change, energy and transport, although details of what this entails have yet to be released.
What has been agreed around sharing of data?
Britain will no longer take part in security sharing organisations and databases such as Europol, Eurojust and SIS-II. However there will be some cooperation for the exchange of passenger information and DNA, fingerprints and vehicle registration data.
Disclaimer: These FAQs have been prepared based on the latest information available and is provided for guidance purposes only.