Toyota, GM and BMW warn against Brexit

The 'Brexit' debacle, explained

Some of the world’s leading car makers have come out in support of Britain remaining in the European Union.

Jaguar Land Rover, Toyota (TM), BMW (BAMXY) and Vauxhall — owned by GM (GM) — said a vote to leave the EU (the so-called Brexit) could damage the U.K.’s booming car industry.

The industry depends on exports. The Society of Motor Manufacturers and Traders said 80% of vehicles made in the U.K. are exported, with more than half of those sold to the rest of the EU.

Dropping out of the EU single market — the biggest in the world — could damage those exports, the society said.

The automotive industry supports 800,000 jobs across the U.K. and car manufacturing contributes £15.5 billion ($22.6 billion) annually to the U.K. economy, according to the SMMT.

And the industry has just had a bumper year in 2015, producing the highest number of cars since 2005.

Demand from China and Russia fell sharply, but exports to the EU grew.

Being part of the EU is also important for automakers because they import lots of parts from other member states.

“Our European supply chain has been fundamental in helping us to meet customer expectations worldwide and achieve sustainable, profitable growth,” said Ken Gregor, the chief financial officer of Jaguar Land Rover.

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Toyota, the world’s biggest automaker, published a separate letter on Monday detailing its concerns over Brexit.

“Put simply our Burnaston and Deeside plants were built in the U.K. to make cars and engines for Europe,” it wrote in the letter to employees. “If the U.K. leaves the EU, we think it unlikely that the U.K. can keep the current trading arrangements … and this would mean we would have to pay duties on parts and cars.”

Those duties could be as high as 10%, Toyota said. Nearly 90% of the cars Toyota makes in the U.K. are exported, with 75% of them going to the EU.

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The Vote Leave campaign argues that Brexit could give the car industry a boost.

“A vote to leave could provide a boost to the industry as we would be free to sign free trade agreements with emerging markets — something we are currently forbidden from doing by the EU,” said Matthew Elliott, Vote Leave chief executive.

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