Japanese car giants Toyota and Nissan have demanded that the UK government covers the multi-billion pound cost of additional tariffs if the UK fails to secure a trade deal with the EU, Nikkei Asian Review reports.

Tariffs on passenger cars exported from the UK  could jump from zero to 10% if there is no-deal.  Car industry body The Society of Motor Manufacturers and Traders  (SMMT) estimates this will cost  car  makers  £ 4.5 billion a year. 

Japanese manufacturers produce nearly half of the 1.3 million vehicles made in the UK last year. Exports to the EU accounted for 44% of British-made vehicles, according to the SMMT’s report.  

Threats to quit UK

Both Nissan and Toyota have previously signalled they could  quit the UK market if the 10% tariffs were imposed due to their slim profit margins. Honda has already said it will close its Swindon production plan next year. 

Other car companies, such as Jaguar Land Rover and BMW, could follow suit and demand the UK government cover their increased costs. BMW chief executive, Oliver Zipse, has previously said that the company will continue to produce cars in the UK if tariffs can be kept to 5%. 

UK targets zero tariff

A UK government spokesperson said the UK was working for a negotiated outcome with a zero tariff, zero quota free trade agreement that would benefit both sides.

"We remain committed to working with the automotive industry to try to ensure an outcome that reflects business interests across the UK," the spokesman said.

Bodies that represent the car industry in the UK and Europe  have called on both sides to urgently agree a free trade agreement. Failure to do so could cost the sector €110 billion (£200bn) in lost trade over a five-year period.