Will Nissan take over the British car market post-Brexit ?

Ever since the start of the Brexit debate, the Nissan car plant at Sunderland has been a political football. In one corner, Remainers tried to scare voters during the referendum with their claims that Nissan would close the plant with tens of thousands of jobs being lost.

From the Brexit corner, campaigners found themselves facing a lawsuit from Nissan after they used the company’s logo on leaflets declaring that big employers would stay in the UK no matter what the outcome of the referendum.

Even after Vote Leave won the match, the plant’s success or failure has remained a totemic if not controversial football. In a remarkable move, Theresa May personally offered Nissan not only assurances the UK would remain a competitive manufacturing base for them, but as it later turned out, a secret state aid sweetener worth £80 million.

For May’s defenders, the £80m package was an adroit move. It not only helped reassure a key business but can perhaps be seen as the start of the Tory courting of voters in Labour’s “Red Wall”. For the critics, it was proof that Brexit promised to be so destructive that the government was reduced to bribing companies not to flee. Further ammunition came to them when Nissan announced it was pulling plans to build a new car model in Sunderland and warned that a No Deal Brexit could sink the plant.

How times change. In March this year Nissan invested another $400 million in Sunderland and, according to newspaper reports, is planning for its partner, Renault, to move the manufacture of two of its most popular models from Barcelona to the Northeastern plant.

Nissan has yet to confirm the news but there seems to be little doubt that this is the plan being hatched as car makers around the world draw in their horns faced with falling profits.

Even Labour’s MP for Gateshead, Ian Mearns, is delighted with the speculation. So too are Brexiteers, many of whom feel vindicated in their longstanding belief that dire warnings about Brexit’s effects on businesses were overblown.

Still, while this development is an undeniable boon for Sunderland not everything fits the Brexit narrative so neatly.

For one, a large part of the Brexit project has been based around the ambition that once outside the EU, the UK could set itself up as a hub for global free trade.

Ironically, Nissan is reportedly pulling out the European market that it has struggled to compete in to concentrate on the UK market. According to the Financial Times, Nissan hopes to use its huge UK production line to grow its current 4% market share to 20% of the domestic market.

The gamble may be a good one for Nissan. The new tariff regime announced recently for the post-transition period removes import duties a range of goods with two exceptions, agricultural products and cars which will be subject to tariffs of 10%.

If, as looks likely bar a sudden breakthrough, Britain ends up striking a fairly minimal trade deal with the EU by the end of this year, these tariffs could well apply to European cars. With imported cars more expensive a gap could well open for Nissan to exploit.

That UK produced cars would then face EU import tariffs would not overly worry Nissan if it is indeed planning to reduce its presence in that market. Most major automotive markets, like the US and Asia, tend to produce their cars locally.

However, what benefits Nissan and Sunderland may not necessarily benefit the British public. The worry is that tariffs will be passed on to British consumers not just in the form of more expensive imported cars, but might also mean Nissan can safely push up its own prices on domestically produced cars while remaining competitive.

Either way, it looks as though Nissan is here to stay in Sunderland for years to come and to provide thousands more jobs for the region.

The Sunderland plant is now one of the most advanced car manufacturing factories in the world. Considering Britain’s legacy of tortured relations between the car industry and the unions it is surprising, and heartening, that this is not just because of the Japanese technology but due to remarkably good industrial relations between management, workers and the unions.

However, Nissan and Renault’s latest plans also tell a more troubling tale of a company that has struggled to compete in other European economies and is now betting on the UK willingly becoming a captive market for its cars. There would be a certain irony if Brexit, a project pioneered by the libertarian end of the Tory party, ended up ushering back in protectionism.