Brexit – What’s in it for the aftermarket?

Brexit – What’s in it for the aftermarket?

With the deadline looming, Neil Pattemore returns to give readers an insight into the extremities of Brexit, and the repercussions its implementation will have on the UK automotive aftermarket – both positive and negative.

Whichever way you originally voted, or what your thoughts are now, it seems clear that ‘bomber Boris’ has lit the fuse to exit the European Union at the end of October. At the time of writing, it is unclear what will happen on the final departure date, but there is likely to either be some sort of ‘last minute’ deal (with a possible extension to the deadline to provide additional time for ‘the deal’ to be implemented), or we ‘crash out’ with no deal.

There are likely to be a number of key aspects after the Brexit date, including the overall economy’s performance, the strength of sterling, the legislative position that will define what rules we will be working to, and from all of this, the price and availability of spare parts. Although as a ‘small business’ operating a vehicle repair workshop in the UK, the wider ‘maelstrom’ of Brexit in Europe and beyond is likely to have profound consequences on your business.

The process has already started, as the document that repealed the 1972 Act, which is the vehicle that sees European Regulations directly flow into UK law, was signed on 18th August 2019. However, the task at hand is massive, with some 945 Acts of Parliament covering 231 EU obligations, and with a staggering 33,630 UK statutory instruments that implement 4,283 EU obligations – every law passed by the European Commission  between 1993 and 2014, all 49,699 of them.

It is likely that the Government will continue to reference European legislation after Brexit irrespective of the eventual outcome. In particular, this includes vehicle type approval legislation regarding the rights of access to vehicle repair and maintenance for independent operators, but perhaps more worryingly, the ‘parallel’ Block Exemption Regulation (BER) is based on competition law. In both cases, there are important elements of this legislation that would need to be included, such as the next type approval legislation (EU 2018/858) that will come into force in Europe on 1st September 2020, and the BER, which will end in May 2023. After these dates, the government will need to decide if this legislation would need to be included and if so, what it would contain.

However, in the United Nations WP29 group in Geneva (previously known as UNECE), vehicle type approval requirements are being created, and these are now being referenced in European Regulations. Unfortunately, these UNECE Regulations are very limited, with few, if any provisions to provide access to repair and maintenance information (RMI) for independent operators.

So, although the UK Government’s initial stance is to continue with all European legislation and then to prioritise what legislation needs changing, you can bet that many will be trying to get the Government’s attention to highlight their particular case of why legislation affecting their sector should be a top priority. Can the aftermarket fit into this category? Probably not if the Government’s stated intention of prioritising and supporting manufacturing industry is to be believed. The aftermarket is a service industry.

If there is no deal, then the UK would have to follow World Trade Organisation rules for countries that don’t have free trade deals with each other, including import tariffs. Without a deal, there would be a significant ‘spanner in the works’ as far as parts deliveries are concerned, but this would also depend on where the imported parts originated – only those parts emanating from the EU would be affected, but this is likely to be a substantial proportion of these parts.

However, if the alternative is to continue with the existing European (Euro 5) legislation, then can the aftermarket consider that it will continue to be business as usual? This may depend on the specific legislation concerned, as well as the import conditions that will affect the flow of replacement parts.

Even though the UK is a signatory to the UNECE Regulations on type approval, there is no advantage, as these do not address aftermarket needs. There are also key emerging challenges facing the aftermarket, such as remote communication with the vehicle for predictive maintenance or remote diagnostics, which are not yet addressed by either European or UK legislation.

The restriction on foreign nationals being able to enter and work in the UK may also impact workshops that will not be able to employ technicians from Europe, and vehicle owners may delay their service and maintenance work until confidence in the economy returns.

However, Brexit’s impact on the economy may also be a great opportunity for the UK aftermarket. When the economy is uncertain, consumers look for competitive deals, and the aftermarket is perfectly placed to offer attractive prices and a choice of replacement parts, even if this choice has some restrictions. If import tariffs are applied, this will impact all parts, including vehicle manufacturer’s OEM parts, which will become even more expensive, further helping the aftermarket’s competitive offers.

The UK Government has famously used the ‘let market forces rule’ mantra, rather than evoke legislation, but the Euro 5 legislation requirements were created to ensure non-discriminatory access to repair and maintenance information. Although the proposal to trade with other countries around the world may help the UK economy (although setting up some of these may also be a challenge), the issue of legislation for the UK aftermarket is a national issue that is, and should remain, linked to the European type approval legislation.

For more information, click here.

Related posts