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Bentley says Brexit priority is deal with Europe, not the U.S.

Logo - The Daily Drill - Digging Deep for precious metal news

* Bentley may do more work on cars abroad if worse EU trade terms

* McLaren Automotive says full tariff would cut sales share in EU

* Government eyes U.S. trade deal, says it would boost sector (Adds details, quotes)

By Costas Pitas

LONDON, March 4 (Reuters) - Luxury carmaker Bentley said free trade with Europe not the United States was its priority as Britain negotiates its new relationship with the European Union, and worse terms could force it to do more work on its British-made cars abroad.

Britain formally left the EU on Jan. 31, but little will change in its relationship with the bloc this year and a new partnership will not come into force until 2021.

While the government views a free trade deal with the United States as a prize, the car industry fears Brexit could lead to delays, tariffs and new paperwork with the EU, its biggest export market.

"As a luxury player with 24% of our sales in the EU and 90% of our parts purchases..., it would help us greatly if we didn't have to pay more for them or get less margin back for the products that we finish and send," Chief Executive Adrian Hallmark told Reuters.

"When we look at the current model, where we just bring in built bodies and then do everything else here, it may be that we do more outside of the UK and then do the rest here. It may shift the balance but we're a long, long way from those discussions."

Although eradicating the 2.5% tariff on the 22% of cars it sells to the U.S. would be a boost, the firm would lose out overall if the EU imposed the maximum 10% tariffs on the 24% of vehicles to Europe and up to 4% on components, Hallmark said.

Aston Martin's boss Andy Palmer also told Reuters on Wednesday the firm was focused on maintaining frictionless trade with the EU.

And McLaren Automotive said that if the EU imposed the highest tariff, the share of the company's roughly 4,700 sales which go to the EU could fall from 18% to as low as 12%.

"Our competitors coming into the UK would have the same tariffs," boss Mike Flewitt told Reuters.


The exact effect of better terms with Washington but worse with Brussels would vary between companies.

Ford could be particularly affected as it imports all the cars it sells in Britain where it is the top brand, but makes nearly 1.1 million engines that are shipped to several countries, risking delays and charges.

Peugeot is also set to make an investment decision this year on whether to keep open its Ellesmere Port car plant and its boss suggested the company could seek compensation.

But the head of its British brand has previously said Brexit could allow it to grow its share and carmakers may weigh up whether building in Britain for domestic buyers, rather than export, gives a competitive advantage.

Nissan, which was encouraged to set up in Britain as a gateway to the continent, has said its entire business in Europe would be unsustainable if high tariffs are imposed.

"It makes no sense. Who wins if you put a tariff on?" said Flewitt. (Editing by Stephen Addison and Barbara lewis)

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