Brexit deal brings huge relief

The President of the German Association of the Automotive Industry (VDA), Hildegard Müller, expressed relief following the announcement of an agreement regulating the future relationship between the United Kingdom and the European Union. “This outcome has eliminated the risk of a ‘no deal’ Brexit and at last companies can concentrate on implementing a free trade agreement,” she said.

Hildegard Müller continued: “The UK’s departure from the European Union was bad for both sides. A negotiated trade agreement is now the best scenario achievable under the circumstances.”

In 2019 the United Kingdom was the largest foreign export market for German OEMs. The German automotive industry operates over 100 production plants in the UK, most of which belong to German supply companies. Suppliers in the UK also depend heavily on the EU market. Some motor vehicle parts cross the English Channel several times before a vehicle is finished. This shows just how close the ties are between British factories and those in the EU-27.

“The agreement now negotiated enables us to avoid some of the adverse effects of a hard Brexit. Now it is important to overcome the practical hurdles as quickly as possible. Long traffic queues to cross the Channel are not in the interests of people on either side of the new border. Time is running out,” Hildegard Müller warned.

The precise details of the deal have not yet been disclosed. Companies have little time to prepare for the required changes. Furthermore, the EU Member States and the European Parliament still have to ratify the agreement. Hildegard Müller stressed, “We also hope that solutions have been found for the difficult topic of rules of origin, so that our members can in fact utilize the advantages of the agreement.”

The United Kingdom is a very important partner for the German automotive industry. It is Europe’s second largest passenger car market after Germany, totaling approx. 2.3 million new registrations in 2019. In terms of sales volume, the UK was the German OEMs’ largest export market in 2019.

Passenger car production in the UK fell by around one quarter within only three years, from just over 1.7 million (in 2016) to 1.3 million vehicles (in 2019). Last year 81 percent of those cars were exported. And 55 percent of the vehicles exported from the UK were destined for EU countries. This means that companies producing in the UK depend crucially on exporting to the European continent. In 2019, 89 percent of new registrations in Britain were imports from other countries. Around 593,000 new vehicles were exported from Germany to the United Kingdom that year, which represents 17 percent of vehicles leaving Germany.