UK car exports to the United States doubled last year after the new tariff deal was made. This deal has created fresh opportunities for new growth in the automotive market. In fact, last year the UK exported over 100,000 cars to the US. Looking at recent figures, in July the US was 18.1% of all UK car exports. This past year has been especially fraught for UK-based carmakers. They fought against surging labor costs, increased global competition, and the impact of Brexit.
In April, US President Donald Trump threatened to slap a massive 25% import tax on all British made cars. This bold move forced Jaguar Land Rover (JLR) to stop all shipments to the US. After extensive negotiations, the tax was cut in half, to 10%, going into effect at the end of June. Due to this adjustment, British car sales in the US market have received a shot in the arm.
Sales of British-made vehicles increased in July as an immediate result of this tariff cut. In July, car manufacturing output in the UK increased for the second consecutive month. This increase was made possible by strong domestic sales and booming exports. UK car manufacturing output continues to decline, down by 11.7% for the year to date. This steep drop is a clear indication of the challenges still being wrought on the sector.
The European Union is still the most important export market for UK car manufacturers – 45.6% of cars were exported there. Despite this, experts emphasize that the US is still “an important market for British-built cars,” as highlighted by Colleen McHugh, chief investment officer at Wealthify.
“It remains a turbulent time for automotive manufacturing, with consumer confidence weak, trade flows volatile and massive investment in new technologies underway both here and abroad.” – Mike Hawes, SMMT chief executive
The recently negotiated tariff exclusion agreement makes it quite clear. A lower tariff rate of 10% would apply, but only for the first 100,000 vehicles exported to the US. Any imports above this limit will revert back to the old 25% import tax. This represents a significant limitation when considering future export potential as UK manufacturers try to find their feet in a landscape burgeoning with competition.
“Given this backdrop, another month of growing car output is good news.” – Mike Hawes, SMMT chief executive
That huge jump in exports is a terrific sign. Industry insiders fear that it is the crisis in UK car manufacturing that has deepened, thanks to changing consumer habits and the political and economic turmoil in the wake of Brexit.