Nissan LEAF Might Become 10% More Expensive Because Of Brexit

OCT 24 2018 BY MARK KANE 38

The European Nissan LEAF is produced in Sunderland, UK

The Nissan LEAF is the best-selling electric car of any kind in Europe this year, but that won’t necessarily be the case after 29 March 2019 at 11 p.m. when Brexit becomes fact.

The European Automobile Manufacturers’ Association (ACEA) warns that without an agreement between the UK and the European Union, the general WTO rules will apply a 10% tariff to all cars traded between the EU and the UK. 10% would make a significant difference to the value proposition, especially when competition strengthens (new models).

Erik Jonnaert, Secretary General of the European Automobile Manufacturers’ Association (ACEA) said:

“Some of our members are also planning a temporary post-Brexit production shutdown. But the harsh fact is that no amount of contingency planning can realistically cover all the gaps left by the UK’s withdrawal from the EU on WTO terms.”

Under WTO rules, a 10% tariff would be applied to all cars traded between the EU and the UK. Jonnaert: “We cannot forget that profit margins in our industry are significantly lower than 10%. At the end of the day, these extra costs will either be passed on to the consumer or will have to be absorbed by the manufacturers.”

Nissan Sunderland Plant

In the worst case scenario, Nissan LEAF produced in the UK for countries in European Union will become 10% more expensive (at least if other factors do not absorb the tariff).

We are not sure about any changes in the case of Norway (the Nissan LEAF’s biggest market in Europe) or Switzerland, which are outside of the EU (there could be no difference), but for sure LEAF’s business case in Europe is currently uncertain.

This also might impact the arrival of the 60 kWh battery version model of the LEAF in Europe.

Press release:

Brexit: auto industry urges negotiators to avert worst-case scenario

Brussels, 17 October 2018 – Ahead of this evening’s Brexit summit, Europe’s auto manufacturers and suppliers have come together to issue a stark warning on the potentially far-reaching impacts of a no-deal scenario on their sector, which would threaten their very business model.

Automobile production plants – be they in the EU27 or the UK – receive and fit millions of parts into vehicles every day. All manufacturers rely on ‘just-in-time’ and ‘just-in-sequence’ delivery and production, without any delays or obstacles. These parts are in constant transit in trucks, arriving as and when they are needed.

Every day 1,100 EU trucks cross the Channel to deliver to car and engine plants in the United Kingdom alone, for example. After Brexit, even short hold-ups at customs will cause massive logistical problems, disrupting the production process and generating significant costs.

“Our members are already making contingency plans and are looking for warehouse spaces to stockpile parts,” stated Erik Jonnaert, Secretary General of the European Automobile Manufacturers’ Association (ACEA), which represents the 15 major Europe-based car, van, truck and bus manufacturers. “However, the space required to stockpile for more than a short time would be absolutely huge – and expensive.”

“Some of our members are also planning a temporary post-Brexit production shutdown. But the harsh fact is that no amount of contingency planning can realistically cover all the gaps left by the UK’s withdrawal from the EU on WTO terms.”

Under WTO rules, a 10% tariff would be applied to all cars traded between the EU and the UK. Jonnaert: “We cannot forget that profit margins in our industry are significantly lower than 10%. At the end of the day, these extra costs will either be passed on to the consumer or will have to be absorbed by the manufacturers.”

“The clock is ticking, but it is not yet too late. That is why we are urging the negotiating teams on both sides to redouble their efforts to successfully conclude a withdrawal deal,” Jonnaert underlined.

Sigrid de Vries, Secretary General, European Association of Automotive Suppliers (CLEPA): “Everything possible must be done to secure a future exchange of goods, services and people that is frictionless. Automotive components often cross borders several times before the final product reaches the customer, and that includes Channel crossings. Any change in the level of integration of the value chain will have an adverse effect on the competitiveness of individual companies and the sector as a whole.”

“Smaller companies in particular, that constitute important building blocks of the supply chain, do not have the internal systems, IT platforms or staff in place to deal with customs declarations, tariff classification, customs valuation, or calculations based on content origin. SMEs will be forced to deal with at least some of these issues if they want to continue to trade and serve their customers, facing additional financial and logistical risks.”

De Vries: “CLEPA recently surveyed its membership and the most important feedback to policy makers was: remove uncertainty. It remains crucially important to provide clarity on the future relation with the UK as quickly as possible, starting with a withdrawal agreement so that a cliff-edge scenario can be avoided.”

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38 Comments on "Nissan LEAF Might Become 10% More Expensive Because Of Brexit"

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Alex

Norway is not going to be like the UK. Norway agrees with almost all rules from EU without having the right to vote, but that way has access to most things any other EU country would have.
UK main complaints were about lack of autonomy and immigration. It would be silly to go the Norway way.
Having said that I think there will be a good agreement and 10% taxes are not to be feared.

wavelet

You misunderstand the article. The LEAF for Europe is currently manufactured in the UK. Currently, the EU-EFTA agreements hold (UK is part of EU, Norway part of EFTA), so there’s no tariff for exporting a LEAF from the UK to Norway.
Once the UK leaves the EU, the EU-EFTA agreement is no longer relevant. Tariffs on LEAFs will then depend on the agreement between the UK and Norway (or EFTA in general). In the absence of such an agreement, the WTO tariffs apply.
Ditto for any LEAFs exported from the post-brexit UK to a post-brexit EU country — in the absence of an EU-UK agreement, a 10% tariff will apply.

Longer term (absent a free trade agreement), it might make sense for Nissan to build a new assembly plant in the EU, but that’s takes time and isn’t cheap.

Alex

I was just commenting the political part of the article ;).

Rebel44

10% price increase would make Leaf non-competitive – so Nissan would have a choice to either significantly scale down production (because demand would not be there) or move the factory to EU27

Do Not Read Between The Lines

Depends on how much of the cost of the car is in the UK.
Sterling’s drop in value could cover the 10%.

Rebel44

Batteries and electronics are AFAIK imported, so Sterling’s drop would have no net effect on the final price in EU27.

Alex

Without an agreement you might be right, 10% is too much maybe, but 5% doesn’t seem insane.

KM

Labour costs constitute less than 10% of cost of the factory in Sunderland. Also lots of a parts are imported for Leaf.

the dane

In Denmark tax on cars is 85% of the value up to 26000 Euro, and 150% on the rest. Add VAT of 25% of base price on top of that. An increase of 10% from Nissan makes a huge difference on the consumer buying the Leaf.

Gasbag

….so if the Brits want a Jaguar I-Pace (manufactured in Austria) they are going to have to pay a premium.

After The Irish and Scots go their own way will they be changing their name? Something like DisunitedKingdom or Shadow of its Former Self Kingdom might be more apropos.

Get Real

I prefer, Britain- formerly known as Great!

TM3x2 Chris

Nissan will be fine, the Brits did it to themselves.

Adam

This is not a Leaf specific issue. “Under WTO rules, a 10% tariff would be applied to all cars traded between the EU and the UK.” So all EU cars will see a price increase of 10%. They could also change the point of origin for Leafs heading to the UK. They also build the Leaf in the US and Japan.

G2

How would cars in the EU (that aren’t LEAFs) be taxed 10% unless they were shipped to the UK? Cars moving between EU members would be unaffected.

Adam

I miss understood, I thought the Leaf was built in the EU and shipped to the UK.

wavelet

No, it’s the other way around. The problem will be for the UK automotive industry as a whole, which is pretty significant (~900K employees). Not just Nissan: Honda, Toyota, Ford, BMW (MINI), Jaguar Landrover, Vauxhall and Leyland Trucks all build vehicles in the UK, in addition to several smaller carmakers.
https://www.theguardian.com/politics/2018/jun/26/brexit-uncertainty-putting-860000-jobs-at-risk-warns-car-industry
Now, in the absence of relevant trade agreements, any car exported into the UK from any country in the world that doesn’t have a specific agreement with the UK will also be hit with the 10% tariff. This is because the UK does not currently have any independent trade agreements — everything was done via EU agreements,

AnotherLeafDriver

If this happens and the UK goverment won’t foot the bill an option will be ship the cars from Japan as I believe there is quite a recent trade agreement for cars between EU ja Japan so no duties apply.

Of course this would almost certainly mean shutting down the Sunderland plant as serving just UK market won’t be enough for it to be viable.

viriato

Nissan has alternatives. They can, as you said, import car from Japan, and produce the other made in UK models Qahsqai and Juke in other plants like the spanish ones, were are produced the Renault Kadjar and Captur that are mainly the same cars.
Those will not have alternatives, will be the british Nissan workers.

Priusmaniac

You are right, in case of no deal, importing a Leaf from Japan would be cheaper than importing it from the UK. The higher shipment cost is still lower than a 10% tarif and production efficiency is still better in Japan.

William

If decommissioning some or all of the Sunderland plant becomes necessary, (post Brexit), it will also have an additional bottom line expense to Nissan, and the rest of the global RNM Alliance. Probably a non-starter, until things sort themselves out, after the fact.

viriato

Yes but the fact is that Nissan has a plant in Spain. The plant that recently cease to produce a car with the same platform than the Leaf, the Pulsar. And the same plant, produces the e-NV 200, the electric van with the same battery pack than Leaf.

And Spain has lower labour costs.

So maybe for Nissan the costs doesn’t be so high as it looks.

viriato

If it becomes a hard Brexit, probably Nissan leaves UK. If they not, is sure that UK govern will give incentives and a tax reduction to compensate the higher costs. Maybe laboral costs, will be reduced too.

Some time ago, Carlos Goshn in an interview said: We have factories in Europe for Europe. It hasn’t any sense to have factories for Europe, out of Europe.

As non english, I can’t understand the Brexit. A decission of 1/3 of the british than can has terrible consecuences. Demagogy and populism joined with pervers results.

I hope the pression of the other 2/3 of the british people, can change the decission. As european, I’m not for a soft Brexit. If they want to leave, goodbye and good luck. Europe must not show that leaving UE can be good. Lot of british companies, will go out britain to other european countries. What they don’t want, maybe will be good for others.

Do Not Read Between The Lines

Given that the EU has something like a 75 billion Euro trade surplus with the UK, I’m not sure that the EU is going to be particularly excited about those jobs. Given a weak pound and no tariff advantage for EU-manufactured products, I expect that low-cost Asian manufacturers will be ready to move in.

viriato
So british will change Europe for China or Japan. Is that a good idea?. And if I were a asiatic company, I prefer a 450 million consumers market than a 65 million one. If all I could produce in Uk, is gonna be taxed to be exported to the UE, maybe I choose Europe for install my plants, or maybe I could export from my own country. Japan has a preference commercial treat with UE, as South Korea. And there are another problems, a weak pound can be a sinthom of a weak economy, so a bad calification by rating agencies will be the next step, and this is followed by high interest for finantiation that can weaken the economy even more. In a world were companies and countries trend to join efforts, to be alone is a very bad idea. British don’t gonna change providers and for proximity, familiarity… even regulations of quality, safety, enviroment…. will keep consuming mainly european products. And yes, UE has a huge trade surplus, but don’t forget that UK receives a lot of investments from UE. For example, some investigation centers and agencies in UK ar european. All of this will gone. Or a… Read more »
Anti-Lord Kelvin

Brits could do what they want, it was their choice. Now, what I never understood is how a vote that will determine the economy of not only UK, but also all the European Union and the life of so many people for generations can have been made in 50/50 vote and not in a 66/33 vote, like for a constitutional change in some countries or other important changes. The youngest who had the most to loose with the Brexit were lazy and most of them didn’t go to vote, and the oldest with all their nostalgia of the “Empire” went in force to vote for their “sovereignty” in a world that it is becoming more and more like a village, every day, with the advent of new technologies and far more efficient and cheaper transports…

Dudamus

Sad news, When I bought a Nissan LEAF in 2011 they said back then the batteries were $25,000 part of the car. Now the batteries are less than $5 grand to make, why hasn’t the price dropped $20 grand? They (corporate) are making a killing off those cars, the dealers make nothing. we need millions of $12 grand EVs for everyone with $1200 batteries. Every house is going to need 2 or 3 short range Evs and access to a longer range EV. Or borrow a long range EV from a neighbor. I hope we see some price drops soon.

Great cars by the way.

Rebel44

Nissan was losing tons of money on Leaf sales in 2011.

Their need to replace degraded packs also likely ate a significant % of the current profit from Leaf.

James P Heartney

Hard Brexit (which is the only Brexit the EU will offer) will cause a great many economic dislocations in the UK. Voting to leave was a deeply stupid, self-defeating move, as will become more and more evident with time. They may lose Nissan, along with plenty of other manufacturing.

Rightofthepeople

That’s your opinion, I suppose we will see what happens. The UK survived just fine for hundreds of years without the EU, I’m confident they will survive after Brexit. As an American, I can understand the concerns of the British wanting independence from the rule of foreign nations. That’s how we felt in 1776. 😁

Allan

They’ll be fine, just less influencial and with less jobs. They’ll manage, but ironically they won’t be able to participate, as a counter balance to other regional interests, in shaping European policy that will affect them as they move from a major member to an appendage.

Not the end of the world, but obviously much worse on balance when it comes to growth and control.

offib

The UK existed hundreds of years through colonialist mercantilism. How callus is it to think about survival when it risks much more than itself? The Irish border. Look at it. It’s the final puzzle to this current muddle. And it has a hell of a history to tell of what English nationalism did, enough to prove that you must be joking if you think the British are helpless, under complete and control. The UK, the 3rd most populous EU member with the 3rd most EMP seats, England? Really? They have no say or control?

OtteryLexa

US War of Independence is the wrong analogy. It’s more like the US Civil War, except that EU is not trying to stop Britain leaving, just telling them that if they leave the club, they don’t get to use the clubhouse for free.

Balance folks
But of course it is Germany that wants to sell its BMWs, VW’s & Mercs to their biggest export market – which is the UK. If The EU wants an end to free trade with UK – fine. They sell more to the UK than the UK sells to them. This InsideEVs story is from an EU organization of car manufactures that is desperate to prevent ‘no deal’ WTO rules because the EU will see a reduction in its exports to the UK. Meanwhile, the UK which is the second biggest net contributer to the huge EU Budget after Germany no longer has to keep that undemocratic organization afloat. It is always a mistake to bite the hand that feeds which is what non payers Poland, Romania, Bulgaria etc. did when they tried to lecture the British whilst at the same time handing out their cap for money. UK voters called their bluff. Germany, UK and France are the countries that put big money into the EU budget whilst most of the other 25 countries take money out of the till or put very little in (net). Good luck To France and Germany keeping the EU ship afloat. How many… Read more »
Erwin

If you puncture a tire, you do not set fire to the car. Instead, you have the tire repaired.
Leave vote won just because the British were made to believe they were better and superior to all the other Europeans and so it was better to leave the inferiors to their fate.
That trick has been used many times in history. It regularly works.
That said, it is really sad the UK is going to leave the EU.

viriato

Do you compare this gobalized world, with ancient times?. Maybe UK may use again the colonization economy and slavery to keep its way of life. Will british stole ships on the sea again?. Maybe give licences to pirates?. Maybe could they commerce with opium or get the tea monopol?. Do you think another industrial revolution will be possible only in UK and give them an advantage again?.
Well, we are agree that this times are very different from older ones. UK is not the empire it was in the same way the world is very different too. Now is the little part of the conflict. History has demonstrated hundreds of times before, that usually the weak part of the problem suffers the worst consecuences.

Erwin

If Elon moved a line from Germany to USA/Nevada, I’d move full UK production to Spain, expanding the existing factory.
Is Renault-Nissan-Mitsubishi smaller than Tesla?

Nick

Fortunately better electric cars like Tesla, Jaguar, Hyundai and Kia won’t go up in price. So if Nissan want to compete….

Graeme Kerry

The 10% would be on the cost price Nissan UK sell the car to Nissan Europe,

Its very complexed but in simple terms it works like this, even within the EU Nissan UK sell the cars at close to cost price to Nissan Europe based in Luxemburg (or similar tax efficient country) to minimise the tax burden of making profits in UK. Nissan Europe in Luxemburg then make the profit selling the cars onto eu dealers including those in the UK for close to retail price with low tax implications.

So a 30000 euro leaf will not increase by 3000 it will increase by 10% of the cost price. You then have the added complication of 30% – 50% of the parts in the car being of European origin and the very clever and well paid accountants at Nissan will do some very clever numbers games to minimise the impact of that 10%.

What you also have to realise is the UK import significantly more cars from Europe then they export to Europe. So the government will also be creaming 10% on all those imports which could easily be used to subsidise the exports.