The UK industry body, the Society of Motor Manufacturers and Traders (SMMT), said it welcomed the initiative that would see the removal of the five per cent tariff on UK-made goods.
A statement from the UK government this week said the agreement with Australia means car makers in the Midlands and northern England will see “tariffs of up to five per cent cut, boosting demand for their exports”.
SMMT chief executive Mike Hawes said: “Australia is an important growth market and the industry welcomes the agreement in principle of a trade deal between the two countries.
“If tariffs can be avoided, making UK manufacturers more competitive against international rivals, there is some potential to increase our vehicle exports and we look forward to seeing the finer details of the deal, to ensure the agreement delivers for the automotive sector.
“Given the integrated nature of the automotive industry, however, and the importance of proximity, we must also ensure smooth trade with markets closer to home.”
The UK is Australia’s fifth biggest trading partner and was worth $36.7 billion last financial year.
Figures from Vfacts show Australia imported 18,916 vehicles from the UK in 2020, a substantial fall on the previous year’s 28,025 units that was blamed on the COVID-19 pandemic.
In the first five months of 2021, imports total 9733 vehicles, up 24.8 per cent on the same period in 2020.
The SMMT said the UK sold (about) 20,000 cars to Australia in 2019, compared with 578,000 to the EU. Four out of five cars made in the UK are exported, with the actual percentage in April being 88 per cent.
On a month-by-month basis, the export of vehicles to Australia from the UK is down 16 per cent in April compared with the previous month, but the trend indicates the exports in May were rising, prior to the SMMT releasing final figures for the month.
Datium Insights data said that indications from May figures “suggest car production and export levels are picking up pace to return back to pre-COVID levels.”
“Despite the challenges facing the industry, including chip shortages and shipping delays, demand is proving strong worldwide spurring manufacturers to ramp up production,” Datium said in its latest research.
“Imports into Australia have largely recovered from COVID, however the majority of sales currently are being diverted to private buyers.
“With strong demand from businesses and corporations to re-stock their fleets, new car sales in Australia are likely to be strong over the coming year.”
The FTA with Australia comes after the end of the Brexit transition period on December 31, 2020 which saw the expiration of the UK’s membership of the EU single market and customs union expire.
The UK makes about 130,000 engines a month and about 75,000 vehicles. It exported 88 per cent of that production volume in April with 52 per cent going to the EU, 17.5 per cent to the US and 7.5 per cent to China.
Of the production, 23 per cent were EVs, PHEVs and hybrids.
The biggest factories that supply to Australia are Nissan, Honda and Jaguar Land Rover with contributions from some low-volume producers including Allied Vehicles (manufacturer of taxis and cars for disabled users), Aston Martin, Bentley, Caterham, Dare, Elemental, LEVC, Lotus, McLaren, Morgan, Pilgrim, Radical, Rolls-Royce and TVR.
Honda will close its UK factory next month. It previously supplied models to Australia including the Civic hatchback, CR-V and Type-R. Those are now made in Thailand or Japan.
By Neil Dowling
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