Wednesday 23 October 2019

Truck manufacturers gear up for no-deal Brexit

Truck manufacturers have invested large sums of money to ensure continuity of parts supplies should the UK leave the European Union without a deal. However, questions remain about how long current prices for both parts and vehicles could be held in the face of possible import tariffs and a further decline in the value of sterling against the euro.

Taxes as high as 22 per cent could be imposed on trucks imported complete into the UK according to government plans, which the Road Haulage Association has called to be reviewed, warning that it could make new trucks beyond the reach of some operators.

UK market leader DAF is in a stronger position than the other manufacturers, as its trucks are assembled at Leyland in the UK, albeit mostly from components originating in the EU27.

Phil Moon, DAF Trucks’ UK marketing manager, said there were concerns over component supplies both for assembly and service, but added: “We have taken lots of steps to protect the integrity of our supply chain.

“A no-deal Brexit would be likely to have a bigger impact on UK demand for new trucks than it would on our manufacturing operation.”

DAF parent Paccar has a large parts supply warehouse adjacent to its Leyland manufacturing plant, which mostly contains spares for the UK and Ireland, although it supplies some components to mainland Europe when required.

“Some components are delivered direct from the main parts hub in Eindhoven to individual UK dealers if urgently needed,” he said. “But as a manufacturer we have made sure that dealers have held an additional cushion of essential parts since the first Brexit date in April.

“The long-term objective is to adapt to prevailing conditions, accepting that the throughput of parts will be unpredictable. We can be flexible: past disruptions have seen us switch from using the short-Channel to North Sea transport routes, for example.

“We will be well placed for a no-deal scenario, but there will be an unhelpful impact on the market. There was a desire among customers to refleet before the original Brexit day of 29 March, and this has continued to pull forward demand, helped by the introduction of the new smart digital tacho.”

Sam Whittaker, UK director of customer services and parts at Mercedes-Benz Trucks said: “At a global level, Daimler is fully aware of the importance of a functioning EU internal market.

“The Brexit procedure cannot undermine the EU and its functioning, and for Daimler as a global company, the UK is the most important market in Europe after Germany. Therefore, the trade relation between the UK and the EU must be kept as smooth as possible in the future.

“While we are obviously keen to avoid a hard Brexit, we have been preparing for all eventualities in order to keep our customers and their businesses moving. This includes mapping several scenarios and planning accordingly.”

At a local level, he said Mercedes-Benz has applied to HM Revenue & Customs (HMRC) for two customs authorisations.

“These authorisations will mean our vehicles and parts can move through the UK border with reduced disruption after Brexit. The two we’ve applied for are Authorised Economic Operator (AEO) and Customs Freight Simplified Procedures (CFSP).

“An AEO is a globally recognised ‘trusted trader’ certificate that demonstrates to all customs authorities that we have high-quality international trade controls and processes. Becoming an AEO will show border security and customs that we are considered ‘low risk’, so our goods should be cleared through the UK border more quickly.

“If we hold a CFSP, we’ll be able to make simplified customs declarations when goods arrive at the UK. This eases the amount of data required when parts and vehicles come into the country, and also means our goods are cleared through customs more quickly.

“Of course, there are still concerns about our trucks carrying parts that are allowed to move through the fast lanes getting caught up behind trucks that do not have the same benefit, but this is something we’re continuing to work with the various ports. We plan to use multiple ports of entry to mitigate any restriction in the flow of traffic. We also air freight urgent VOR parts and aim to fast track these as well.

“Our customers trust us to have parts across our dealer network irrespective of the regulatory landscape. It’s difficult to quantify an amount of money that we’ve invested, but it’s been a concerted effort involving a lot of colleagues working with auditors, HMRC and the team in Mercedes-Benz Parts Logistics.

“We have changed our stockholding to increase it by £20m. This is an approximately 50 per cent increase. We have not only targeted fast moving lines but also those parts that are used less often but may cause a VOR. It is our intention to continue our First Pick Service level at over 93 per cent whatever happens in the Brexit agreements.

We have invested in approximately 20,000 square metres of additional space in strategic locations close to our UK Logistics centre in Milton Keynes. We have planned for seven days’ additional stocking of all parts plus an additional four weeks of fast-moving stock at these warehouses.

“In addition to this, our dealers will hold an additional depth of stock as an insurance policy in the first weeks of a potential hard Brexit. We will also hold key critical components locally in Milton Keynes rather than in Germany to shorten lead times and avoid any delays at port.”

He continued: “We’re confident that we’ve done enough to prepare for a no deal exit, but we also know that the government could still secure a deal and thus these measures will not be needed. “It’s a fact of business that sometimes you put in a lot of work for something that is never needed, but as our customers know, it’s better to be prepared and be able to react swiftly rather than not prepare and have to panic.”

Mercedes is also arranging contingency supplies of new trucks.

“If customers have short term requirements we have a continually backfilled, bodied, ready-to-go programme called ‘Work Ready’. Anyone who needs further information should contact their local dealer or visit mbtrucks.co.uk to view stock online,” Sam Whittaker said.

He added that Brexit would “clearly have an impact on the price of a new truck in the event of a no deal due to tariffs”, but said that until details were finalised the potential impact was difficult to quantify, “as many customers fund their vehicles and also use many varied types of contracts including service contracts.”

Martin Hay, managing director of Scania (Great Britain), said: “Scania have already and will continue to optimise our parts stocking policy at both central warehouse level and dealer level to try to provide the highest level of support for our customers following the 31 October Brexit deadline. This has resulted in many initiatives that will help to safeguard our customers and keep Scania vehicles on the road during what could be a very confused period.”

A spokesman for MAN said the German manufacturer had anticipated delays at ports post-Brexit by importing an extra £1 million worth of parts into its Swindon warehouse ahead of the original Brexit day, plus it had encouraged its dealers to stock an extra £0.5 million of key components in the network.

“Stocks have been maintained at that level since then,” he said. “We have a 95 per cent first-time pick rate.

“Extra stocks of new vehicles were also landed, but deadlines for the smart tachograph and Euro 6 D emissions limit placed constraints on that.”

Commenting back in March on the planned no-deal tariffs for truck imports from the EU, RHA chief executive Richard Burnett said there was “no sensible scale to the increases”.

“With the average price of a tractor unit with an engine rating of Euro 6 starting at around £85,000, the prospect of paying over £100,000 for a new truck will, for many, make new vehicle acquisition almost impossible,” he remarked.
“This is a ludicrous situation. UK hauliers, particularly those already at a loss as regards future border crossing processes, will now be faced with massive, additional financial burdens to add to their worries.
“For those who can afford these excessive tariffs, they will have no alternative but to increase their rates by a substantial amount. For those unable to pass the additional cost on, there’s a real risk that Brexit will be the final straw.”

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