Cars for Cheese? EU Turning Point in Japanese Localization

AutoInformed.com on EU Japanese Brand Light Vehicle Production as a Percent of Country Light Vehicle Production - Courtesy LMC Automotive Consultancy

Bloody hell have the British gone daft?

Our friends at consultancy LMC Automotive write that “over the past 30 years or so, Japanese OEMs have been significant investors in the UK’s automotive industry. However, Nissan’s recent decision to cancel capacity expansion plans, and not build the next X-Trail model at its UK flagship plant in Sunderland, could potentially mark a more general turning point in Japan’s commitment to the automotive industry in Britain.”

AutoInformed viewers might remember that we have been flummoxed at the prospect of Brexit – a job destroying machine fueled by xenophobia, the breakup of small villages and resentment over sending Eurocrats in Belgium British Pounds. It’s not only angry white Trump voters who are self-destructive, the UK under the Brexit fiasco is about to lose £9 Billion a year due to a conservative Republican-like temper tantrum that will materially hurt middle class workers, as well as society as a whole.

(See AutoInformed on: No Deal Brexit to Cost UK Auto Sector £9 Billion Per YearBrexit Panic Takes Hold. Auto Industry Urges – Begs? – Negotiators to Avert the Business Killing Worst-Case Scenario, Brexit Automaker Winners, Losers – Predictable and Surprising, ‘Bloody Hell,’ What Does Brexit do to Automakers?, British Car Manufacturing Declines -19.6% In November)

LMC adds, “While a declining outlook for the European diesel X-Trail had much to do with the fading commercial viability of Nissan’s UK expansion plans, recent changes to the trading environment will also have made it easier for Nissan to simply import the new model from its home plant, Kyushu, in Japan.” (AutoInformed sighs at what appears to be another elitist generated fiasco.)

AutoInformed.com on EU Japan Trade Agreement“From 1 February 2019, the EU-Japan trade agreement, dubbed ‘Cars for Cheese, ensures that the EU’s 10% tariff on Japanese car imports will be tapered to zero over the next ten years.

“While Japanese OEMs will be encouraged by the competitive boost that a cut in tariffs provides, they may also increasingly choose to import new models rather than invest and localize production in their European ‘transplants.’ Not only will the financial hurdles for European localization be higher, but global trade concerns and the anticipated fall in Japanese domestic plant utilization may encourage Japan’s OEMs to steer new investment back home.

For the UK, Brexit adds another dimension. Should Britain leave without a deal and WTO tariffs are applied to UK vehicle exports, the same cars made in Japan may well end up costing less to import into the EU than those produced just over the Channel in England.

“This has the potential to significantly shrink the UK auto industry in the medium term. And there is much at stake. In 2018, the three UK Japanese transplants of Nissan, Toyota and Honda collectively produced over 730,000 cars, which represent almost half of all Light Vehicles built in Britain.

The ‘Cars for Cheese’ deal could indeed mark a turning point for the growth prospects of Europe’s Japanese transplants. Those single-model smaller facilities may be most vulnerable to import substitution, cancelled investment and, ultimately, closure. Even before Brexit, the UK’s 40% share of Europe’s total transplant production volume arguably placed the country’s auto industry at the greatest risk. In the event of a ‘hard’ Brexit, however, the risks would be magnified significantly.”

About Kenneth Zino

Ken Zino is an auto industry veteran with global experience in print, broadcast and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
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