Brexit could add £1,500 to the cost of European cars

The price of cars like Fiats and Peugeots could jump by as much as £1,500 ($1,871) unless a favourable trade deal is worked out post-Brexit, according to the Society of Motor Manufacturers and Traders (SMMT).

The Telegraph reports that SMMT president Gareth Jones made the prediction at the society’s annual dinner, forecasting a potential cost to the industry of £4.5 billion.

That breaks down as £2.7 billion on levies on EU cars imported into Britain and tariffs of £1.8 billion on vehicles going the other way.

That would work out at an average of £1,500 per car and much of the cost is likely to be passed on to consumers, leading to sharp prices rises for continental cars.

Jones said the government must make sure Brexit does not harm the British car industry, saying: “We operate in an intensely competitive environment. We need to create the right conditions for future competitiveness.”

Theresa May convinced Japanese car manufacturer Nissan to keep and even increase its manufacturing presence in Sunderland, with speculation she promised to insulate the car manufacturer from any effects of Brexit. However, neither side has disclosed the details of the deal.

If sharp price increases as a result of tariffs do become a reality, it could devastate sales of European cars in Britain as cash-strapped Brits stop buying. The Institute for Fiscal Studies last week predicted an “extraordinary and dreadful” wage crisis over the next decade as the falling pound pushes up prices in Britain and wage growth slows.

NOW WATCH: Richard Branson: Entrepreneurs need to fill the gap where government is lacking

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.