COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 1

UK TO

Combination of Brexit and CETA -

Study on the Possibility of Motor Corporations

Moving Vehicle Platforms from UK to Canada

Junxi YU

Engineering and Public Policy, McMaster University COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 2

UK TO CANADA

Abstract

With the help from Canada-European Union Comprehensive Economic and Trade

Agreement (CETA) signed in 2016, enormous opportunities and benefits have been created for the in Canada. Specifically, European Union(EU) tariffs immediately eliminated on all Canadian auto parts that exported to EU. In the European market, UK has been a competitor to Canada in the automotive industry. After Brexit, without the benefits of free trade within EU, vehicles manufactured in the UK start to lose their appeal in price gradually. In the thesis, a comparison on the current situation of five motor corporations in

Canada and the corresponding motor corporations in the UK was made. It was found that only

Honda Canada and Honda UK have an identical vehicle platform referred as Honda Civic platform, which produces same vehicle models, namely Honda Civic Type R and Honda CRV.

On the contrast, the other four auto corporations don’t possess a same vehicle platform, producing same vehicle models in Canada and UK. A thorough analysis on Honda Motor

Company was conducted. The total costs including vehicle price, shipping costs, tariff and currency exchange rate for EU consumers to purchase a from the same platform in Canada and UK was calculated separately. By comparing the total costs of the two purchasing routes, the conclusion and recommendations was provided. It was concluded that Honda Motor Company could beneficially move vehicle platforms from UK to Canada, and the results also held for the other motor corporations.

Keywords: CETA, Brexit, European market, Motor Corporations, Automotive manufacturers, Canada, UK, Vehicle platforms, Honda, Moving, Possibility COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 3

UK TO CANADA

1. Introduction

With the Canada-European Union Comprehensive Economic and Trade Agreement

(CETA) agreement reached by the European Union (EU) and Canada in 2016, enormous opportunities and benefits have been created for the automotive industry in Canada. Specifically, all Canadian auto parts that exported to European Union(EU) holds the tariff free advantage.

After Brexit, without the tariff benefits within EU, vehicles manufactured in the UK will start to lose their appeal in price gradually. With the combination of CETA and Brexit, it is clear that

Canada has more favorable environment for the development for automotive industry, especially for long-term investments. Particularly, the current policy situation is beneficial for five auto corporations in Canada, including , Ford, , Fiat Chrysler Automobiles

(FCA) and Honda. The thesis will be focused on a detailed comparison regarding the current situation of vehicles sold in Canada and UK, and the corresponding vehicle platforms. The cost of purchasing a specific vehicle model produce by an identical vehicle platform from Canada and

UK will be calculated separately. By comparing the calculation results, conclusion and recommendations will be provided.

2. The Current Policy Situation in the Canada and in the UK

2.1 CETA

“The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) signed in 2016 is a progressive trade agreement that upholds and promotes the values that

Canada shares with the EU.” COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 4

UK TO CANADA

Resource: http://www.international.gc.ca/trade-commerce/trade-agreements-accords- commerciaux/agr-acc/ceta-aecg/index.aspx?lang=eng

2.1.1 CETA and Automotive Industry in the Canada

“How will CETA benefit Canadian automotive sector exporters?”

Fig. 1 EU tariff elimination under CETA (Chart 1) Resource: http://www.international.gc.ca/gac-amc/campaign-campagne/ceta- aecg/automotive-automobile.aspx?lang=eng

Upon CETA’s application, EU tariffs will be immediately eliminated on all Canadian auto parts.

Fig. 2 EU tariff elimination under CETA (Chart 2) Resource: http://www.international.gc.ca/gac-amc/campaign-campagne/ceta- aecg/automotive-automobile.aspx?lang=eng

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“Tariffs on all remaining types of vehicles will be phased out over the following 7 years.” Resource: http://www.international.gc.ca/gac-amc/campaign-campagne/ceta-

aecg/automotive-automobile.aspx?lang=eng

2.2 Brexit

“Brexit is the popular term for the United Kingdom's intended withdrawal from the

European Union. In a UK referendum on 23 June 2016, 51.9% voted to leave the EU.”

Resource: https://en.wikipedia.org/wiki/Brexit

2.2.1 Brexit and Automotive Industry in the UK

The automotive industry in UK has been trapped in an incredibly difficult circumstance after Brexit, which could lead to an increasing cost of manufacturing vehicles for all auto corporations in the UK.

Resource: https://www.autovistagroup.com/news-and-insights/concern-over-impact-brexit- european-automotive-industry

Moreover, without the tariff free in the EU, the tariff benefits will be highly impacted.

After Brexit, “the tariff on vehicles imported into the European Union from UK is forced to fall back on basic World Trade Organization rules, which is up to 10%, unless some extra further agreements signed by UK and the EU, such as a tariff-free deal.”

Resource: http://www.independent.co.uk/news/business/news/brexit-latest-tariffs-on-uk-car- exports-to-europe-would-be-disastrous-for-jobs-says-jaguar-land-a7334991.html COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 6

UK TO CANADA

In more detail, “tariffs, for instance, could amount to 10% for passenger , 10 –

22% for commercial vehicles, and 3 – 4% on average for parts and components.”

Resource: https://www.autovistagroup.com/news-and-insights/concern-over-impact-brexit- european-automotive-industry

“SMMT analysis suggests that EU tariffs on cars alone could add at least an annual

£2.7 billion to imports and £1.8 billion to exports.”

Resource: https://www.smmt.co.uk/industry-topics/brexit/

Without a shadow of doubt, vehicles manufactured in UK will lose their appeal in price within the European Union after Brexit.

2.3 The combination of current policy situation in the Canada and in the UK

With the combination of CETA and Brexit, it is clear that Canada has more profitable and sustainable environment for the development of automotive industry, especially for long-term development.

3. The current situation of vehicle platforms in Canada

“Canada is currently the ninth-largest auto producer in the world, producing 2.1 million cars a year. However, China, Spain, India, Brazil, recently surpassed Canadian production for the first time.”

Resource: https://en.wikipedia.org/wiki/Automotive_industry_in_Canada COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 7

UK TO CANADA

To date, there are five automotive manufacturers in Canada in total, including Toyota

Canada, Canada, Ford Canada, , and Fiat Chrysler Automobiles

(FCA) Canada.

3.1 Toyota’s vehicle platforms in Canada

3.1.1 Toyota’s vehicles sold in Canada

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Fig. 3 Toyota’s vehicles sold in Canada Resource: https://www.toyota.ca/toyota/en/

3.1.2 Toyota’s vehicles manufactured in Canada

RAV4 is manufactured in the Toyota Woodstock Plant by the Toyota New MC platform.

Corolla Sedan is manufactured in the Toyota Cambridge Plant North by the Toyota B platform.

3.1.3 Toyota’s vehicle platforms in Canada

Toyota New MC platform

Visit https://en.wikipedia.org/wiki/Toyota_MC_platform for more information.

Toyota B platform

Visit https://en.wikipedia.org/wiki/Toyota_B_platform for more information.

COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 9

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3.2 Lexus’s vehicle platforms in Canada

3.2.1 Lexus’s vehicles sold in Canada

Fig. 4 Lexus’s vehicles sold in Canada Resource: http://www.lexus.ca/lexus/en

3.2.2 Lexus’s vehicles manufactured in Canada

RX 350 and RX 450h are manufactured in the Toyota Cambridge Plant by the Toyota

K plant.

3.2.3 Lexus’s vehicle platforms in Canada

Toyota K platform

Visit https://en.wikipedia.org/wiki/Toyota_K_platform for more information. COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 10

UK TO CANADA

3.3 Ford’s vehicle platforms in Canada

3.3.1 Ford’s vehicles sold in Canada

Fig. 5 Ford’s vehicles sold in Canada Resource: http://www.ford.ca/

3.3.2 Ford’s vehicles manufactured in Canada

Ford Edge is manufactured in the Oakville Assembly Complex by the Ford CD3 platform (2007 – 2014), and the Ford CD4 platform (2015 – present).

Ford Flex is manufactured in the Oakville Assembly Complex by the Ford D4 platform (2009 – present).

Lincoln MKX is manufactured in the Oakville Assembly Complex by the Ford CD3 platform (2007 – 2014), and the Ford CD4 platform (2016 – present).

Lincoln MKT is manufactured in the Oakville Assembly Complex by the Ford D4 platform (2010 – 2017).

COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 11

UK TO CANADA

3.3.3 Ford’s vehicle platforms in Canada

Ford D3 and D4 platform

Visit https://en.wikipedia.org/wiki/Ford_D3_platform for more information.

Ford CD3 platform

Visit https://en.wikipedia.org/wiki/Ford_CD3_platform for more information.

Ford CD4 platform

Visit https://en.wikipedia.org/wiki/Ford_CD4_platform for more information.

3.4 General Motors’ vehicle platforms in Canada

3.4.1 General Motors’ vehicles sold in Canada

Chevrolet’s vehicles sold in Canada

Fig. 6 ’s vehicles sold in Canada Resource: http://www.chevrolet.ca/?eVar25=gmca_canada_chevrolet

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Buick’s vehicles sold in Canada

Fig. 7 ’s vehicles sold in Canada Resource: http://www.buick.ca/?eVar25=gmca_canada_buick

GMC’s vehicles sold in Canada

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Fig. 8 GMC’s vehicles sold in Canada Resource: http://www.gmccanada.ca/?eVar25=gmca_canada_gmc

Cadillac’s vehicles sold in Canada

Fig. 9 ’s vehicles sold in Canada Resource: http://www.cadillaccanada.ca/?eVar25=gmca_canada_cadillac COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 14

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3.4.2 General Motors’ vehicles manufactured in Canada

Cadillac XTS is manufactured in the Car Assembly (GM Oshawa) by the

GM Epsilon II platform (2013 – present).

Buick Regal is manufactured in the (GM Oshawa) by the GM

Epsilon II platform (1988 – 2017).

Chevrolet Equinox is manufactured in the CAMI Automotive (Canadian Automotive

Manufacturing Inc.) by the GM Theta platform (2004 – present).

GMC Terrain is manufactured in the CAMI Automotive (Canadian Automotive

Manufacturing Inc.) by the GM Theta platform (2009 – present).

3.4.3 General Motors’ vehicle platforms in Canada

GM Epsilon platform

Visit https://en.wikipedia.org/wiki/GM_Epsilon_platform for more information.

GM Theta platform

Visit https://en.wikipedia.org/wiki/GM_Theta_platform for more information.

CAMI Automotive

Visit https://en.wikipedia.org/wiki/CAMI_Automotive for more information.

3.5 Fiat Chrysler Automobiles (FCA)’s vehicle platforms in Canada

3.5.1 Fiat Chrysler Automobiles (FCA)’s vehicles sold in Canada

Chrysler’s vehicles sold in Canada COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 15

UK TO CANADA

Fig. 10 Chrysler’s vehicles sold in Canada Resource: https://www.chrysleroffers.ca/offers/ontario

Dodge’s vehicles sold in Canada

Fig. 11 Dodge’s vehicles sold in Canada Resource: https://www.dodgeoffers.ca/offers/ontario

Fiat’s vehicles sold in Canada

Fig. 12 Fiat’s vehicles sold in Canada Resource: https://www.fiatcanada.com/en/

Jeep’s vehicles sold in Canada

Fig. 13 Jeep’s vehicles sold in Canada Resource: https://www.jeepoffers.ca/offers/ontario

RAM’s vehicles sold in Canada

Fig. 14 RAM’s vehicles sold in Canada Resource: https://www.ramtruckoffers.ca/offers/ontario

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3.5.2 Fiat Chrysler Automobiles (FCA)’s vehicles manufactured in Canada

Chrysler 300 is manufactured in the Brampton Assembly by the Chrysler LX platform (2005 – present).

Dodge Charger is manufactured in the Brampton Assembly by the Chrysler LX platform (2006 – present).

Dodge Challenger is manufactured in the Brampton Assembly by the Chrysler LC platform (2008 – 2014), and the Chrysler LA platform (2015 – present).

Chrysler Town & Country was manufactured in the Windsor Assembly by the

Chrysler S platform (1990), Chrysler AS (1991 – 1995), Chrysler NS platform (1996 – 2000),

Chrysler RS platform (2001 – 2007), and Chrysler RT platform (2008 – 2016).

Dodge Grand Caravan is manufactured in the Windsor Assembly by the Chrysler S platform (1987 – 1990), the Chrysler AS (1991 – 1995), Chrysler NS platform (1996 – 2000),

Chrysler RS platform (2001 – 2007), and Chrysler RT platform (2008 – present).

Chrysler Pacifica is manufactured in the Windsor Assembly by the Chrysler RU platform (2017 – present).

3.5.3 Fiat Chrysler Automobiles (FCA)’s vehicle platforms in Canada

Chrysler LX platform

Visit https://en.wikipedia.org/wiki/Chrysler_LX_platform for more information.

Chrysler LC platform

Visit https://en.wikipedia.org/wiki/Chrysler_LX_platform or more information.

Chrysler LA platform

Visit https://en.wikipedia.org/wiki/Chrysler_LX_platform for more information. COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 17

UK TO CANADA

Chrysler S platform

Visit https://en.wikipedia.org/wiki/Chrysler_S_platform for more information.

Chrysler AS platform

Visit https://en.wikipedia.org/wiki/Chrysler_S_platform for more information.

Chrysler NS platform

Visit https://en.wikipedia.org/wiki/Chrysler_S_platform for more information.

Chrysler RS platform

Visit https://en.wikipedia.org/wiki/Chrysler_S_platform for more information.

Chrysler RT platform

Visit https://en.wikipedia.org/wiki/Chrysler_S_platform for more information.

Chrysler RU platform

Visit https://en.wikipedia.org/wiki/Chrysler_S_platform for more information.

3.6 Honda’s vehicle platforms in Canada

3.6.1 Honda’s vehicles sold in Canada

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Fig. 15 Honda’s vehicles sold in Canada Resource: https://www.honda.ca/

3.6.2 Honda’s vehicles manufactured in Canada

Honda Civic coupe non-SI and SI & sedan is manufactured in the Alliston Plant by the Honda Civic platform (1998 – present).

Honda CRV is manufactured in the Alliston Plant by the Honda Civic platform (2012

– present).

3.6.3 Honda’s vehicle platforms in Canada

Honda Civic platform

Visit https://en.wikipedia.org/wiki/Honda_Civic for more information.

COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 19

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4. The current situation of vehicle platforms in UK

Fig. 16 UK Automotive at a glance Resource: https://www.smmt.co.uk/industry-topics/uk-automotive/

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Fig. 17 Key UK manufacturing sites Resource: https://www.smmt.co.uk/wp-content/uploads/sites/2/100049_SMMT-Facts-

Guide-2015.pdf

Taking the current situation of automotive industry in Canada into consideration, we have found three manufacturing companies located in UK in common: Toyota UK, Ford UK, and Honda UK.

COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 21

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4.1 Toyota’s vehicle platforms in UK

4.1.1 Toyota’s vehicles sold in UK

Fig. 18 Toyota’s vehicles sold in UK Resource: https://www.toyota.co.uk/index.json

4.1.2 Toyota’s vehicles manufactured in UK

Auris E150 was manufactured in the Toyota Manufacturing UK (Burnaston,

Derbyshire, UK) by the Toyota New MC platform (2006 – 2012). COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 22

UK TO CANADA

Avensis E180 is manufactured in the Toyota Manufacturing UK (Burnaston,

Derbyshire, UK) by the Toyota New MC platform (2012 – present).

4.1.3 Toyota’s vehicle platforms in UK

Toyota New MC platform

Visit https://en.wikipedia.org/wiki/Toyota_MC_platform for more information.

4.2 Ford’s vehicle platforms in UK

4.2.1 Ford’s vehicles sold in UK

Fig. 19 Ford’s vehicles sold in UK Resource: https://www.ford.co.uk/

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4.2.2 Ford’s current manufacturing situation in UK

Ford Duratorq engine, Ford Duratec 20 and Ford Duratec 23 are manufactured in the

Dagenham Engine (Dagenham, England).

MT82 Transmission, IB5 transaxle, MT 75 Transmission and PTO Transmissions are manufactured in the Getrag Ford Transmission (Liverpool, England).

Ford MT-75 Transmission and Ford IB5 Transmission are manufactured in the Halewood Transmission (Halewood, England).

4.2.3 Ford’s vehicle platforms in UK

Currently, Ford doesn’t have any vehicle platforms in UK at all.

4.3 Honda’s vehicle platforms in UK

4.3.1 Honda’s vehicles sold in UK

Fig. 20 Honda’s vehicles sold in UK Resource: http://www.honda.co.uk/

COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 24

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4.3.2 Honda’s vehicles manufactured in UK

Honda Civic is manufactured in the Honda of the UK Manufacturing (Swindon, UK) by the Honda Civic platform (1994 – present).

Honda CRV is manufactured in the Honda of the UK Manufacturing (Swindon, UK) by the Honda Civic platform (2000 – present).

4.3.3 Honda’s vehicle platforms in UK

Honda Civic platform

Visit https://en.wikipedia.org/wiki/Honda_Civic for more information.

5. Common vehicle platforms in both Canada and UK

Canada UK

RAV 4 Avensis E180 Toyota New MC platform Toyota Woodstock Plant, Burnaston, Derbyshire, UK Ontario, Canada Honda Civic coupe non-SI, SI & Honda Civic & Honda CRV Honda Civic sedan & Honda CRV platform Alliston Plant, Ontario, Canada Swindon, UK

Fig. 21 Common vehicle platforms in both Canada and UK

From the above chart, it is found that the two common vehicle models manufactured in both Canada and UK are Honda Civic and Honda CRV by the Honda Civic platform. However, no common vehicle model is found by Toyota New MC platform. To make a fair comparison, COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 25

UK TO CANADA only Honda Civic and Honda CRV by the Honda Civic platform are considered in the following calculation.

6. Consideration (Price, Shipping Cost, Tariff, Currency)

6.1 Honda Civic

6.1.1 The price of Honda Civic of Canada/UK

Fig. 22 Honda Civic Models sold in Canada Resource: https://www.honda.ca/

Fig. 23 Honda Civic Models sold in UK Resource: http://www.honda.co.uk/

Civic Type R was chosen to calculate and compare the shipping costs from Canada to the EU countries and from UK to the EU countries, separately. The tariff rates for the two purchasing routes were also taken into account.

The price of Honda Civic R

In Canada, the price is staring from C$40,890.

In UK, the price is starting from £30,995. COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 26

UK TO CANADA

The Sales Tax of Ontario

“For vehicles purchased privately within Ontario, RST is based on the purchase price

or the vehicle's wholesale value (Red Book), whichever is greater. Specified vehicles without a

Red Book value (e.g., off road vehicles, boats, aircraft, etc.) are taxed at13% based on the

purchase price.”

Resource: http://www.fin.gov.on.ca/en/tax/rst/

New vehicle tax rates from 1 April 2017

“Vehicle tax for the first year is based on CO2 emissions. After the first year, the

amount of tax that needs to be paid depends on the type of vehicle. The rates are:

• £140 a year for petrol or diesel vehicles

• £130 a year for alternative fuel vehicles (hybrids, bioethanol and LPG)

• £0 a year for vehicles with zero CO2 emissions”

Resource: https://www.gov.uk/government/news/new-vehicle-tax-rates-from-1-april-

2017

Fig. 24 Honda Civic Type-R (2015 – 2017) Running Costs Resource: http://www.parkers.co.uk/honda/civic/type-r/review/running-costs-mpg/

COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 27

UK TO CANADA

Assume the insurance remains the same, the sum of price and tax is:

In Canada, C$40,890 * (1 + 13%) = C$46,205.7

In UK, £30,995 + £220 = £31,215 (for the first year of purchasing)

6.1.2 The shipping costs from Canada/UK to the EU

From Canada to the EU

Honda Civic Type R is produced in the Alliston, ON, Canada. The destination can be selected among all the European countries other than UK. The city Genoa, Italy was selected as the shipping destination.

The exact cost of shipping a car from Alliston to Genoa was not found. As an estimation from the website https://www.wcshipping.com/quote, the total shipping cost from

Buffalo, NY, US to Genoa, Italy was calculated. This website can only calculate the shipping cost starting from US. Buffalo, the nearest city in the US close to Ontario, Canada, was chosen as a starting point.

Moreover, Honda Civic Type R’s body dimensions are 4.39m*2.065m*1.466m

(l*w*h).

Resource: https://en.wikipedia.org/wiki/Honda_Civic_Type_R

A 20ft container’s dimensions are 6.04m*2.35m*2.39m (l*w*h), and the container are capable to ship a car with the max dimensions 5.75m*2.2m*2.2m (l*w*h).

Resource: http://www.movehub.com/uk/international-shipping/italy

Therefore, Honda Civic Type R can fit a 20ft container. COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 28

UK TO CANADA

Fig. 25 The shipping cost from Buffalo to Genoa using a dedicated 20 ft container Resource: https://www.wcshipping.com/quote

The shipping journey to from Canada to the EU countries will be divided into two segments, namely ground section and ocean section, which will take a transit of 5 days and 16 days, respectively. 10 extra days for processing export document is also required, therefore, the total shipping period will last 31 days. The total shipping cost is US$2,750, including US$450 for ground shipping and US$2,300 for ocean shipping.

It is important to note that the exact price for shipping the car from Alliston to Genoa might be slightly higher or lower. It is estimated that the shipping cost from Buffalo to Genoa is the same shipping cost from Alliston to Genoa, which is US$2,500.

From UK to the EU

Honda Civic Type R is produced in the Swindon, UK. In principle of controlling variables to make a fair comparison, the destination is also selected to be Genoa, Italy. COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 29

UK TO CANADA

After searching on the Internet, a website named “move hub for moving abroad” was found. It seems that moving hub has nothing to do with shipping a car. In fact, if a car is included in all the belongs to move, the shipping cost of a car will be calculated by the website as well.

Only one deficiency of the website is that the places of departure and the destination can only be countries rather than cities.

The base price to ship a car within a 20ft container from UK to Italy is £921 - £1018 taking 2 – 5 days.

Fig. 26 The base price to ship a car within a 20ft container from UK to Italy Resource: http://www.movehub.com/uk/international-shipping/italy

In terms of shipping a Honda Civic Type R from Swindon to Genoa, the base price shipping from UK to Italy provided by the website can be averaged. It is assumed that the shipping cost from Swindon to Genoa is £1000.

6.1.3 The tariff from Canada/UK to the EU

From Canada to the EU

Based on the above analysis, it is assumed that the tariff fees to ship a Honda Civic

Type R from Alliston, ON, Canada to Genoa, Italy is zero in this paper.

From UK to the EU

“Buying goods online coming from a non-Europe Union country”

“The customs value is made up of: COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 30

UK TO CANADA

• the price paid for the goods,

• the insurance cost,

• the shipping cost.”

Resource: http://ec.europa.eu/taxation_customs/individuals/buying-goods-services- online-personal-use/buying-goods/buying-goods-online-coming-from-a-noneu-union-country_en

From the above, it is known that a Honda Civic Type R’s the price plus tax for the first-year sold in UK is £31,215.

The tariff from UK to the EU countries is 10% * (£31,215 + insurance fee) = £3,121.5

+ 10% * insurance fee

6.1.4 Currency consideration

Up to 19:02 UTC 19 August 2017, the British pound to US dollar exchange rate is

1.287.

Resource: http://www.x-rates.com/calculator/?from=GBP&to=USD&amount=1

Up to 19:02 UTC 19 August 2017, the Canadian dollar to US dollar exchange rate is

0.795.

Resource: http://www.x-rates.com/calculator/?from=CAD&to=USD&amount=1

6.1.5 Total Costs Comparison

From Canada to the EU

The price and tax to purchase a Honda Civic Type R in Canada is C$46,205.7 =

US$36,724.47 COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 31

UK TO CANADA

The shipping cost from Alliston to Genoa is US$2,500

The tariff from Canada to the EU is 0.

So, the total cost = US$36,724.47 + US$2,500 + 0 + insurance fee = US$39,224.47 + insurance fee

From UK to the EU

The price and tax (for the first year) to purchase a Honda Civic Type R in UK is

£31,215 = US$40,182.72

The shipping cost from Swindon to Genoa is £1000 = US$1,287.33

The tariff from UK to the EU is £3,121.5 + 10% * insurance fee = US$4,018.32 +

10% * insurance fee

So, the total cost = US$40,182.72 + US$1,287.33 + (US$4,018.32 + 10% * insurance fee) + insurance fee = US$45,488.37 + 1.1 * insurance fee

Assume the insurance fee remains the same, the total cost to purchase a Honda Civic

Type R from Canada to the EU countries, which is the sum of US$39,224.47 and insurance fee, is less than the total cost to purchase the same model from UK to the EU countries, which is the sum of US$45,488.37 and 1.1 * insurance fee.

Comparison and Conclusion

For customers in Genoa, Italy, it’s more attractive to purchase a Honda Civic Type R produced in Canada rather than that produced in UK. The conclusion can also be extended to the COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 32

UK TO CANADA

EU that Canada is more attractive than UK in terms of if a European plan to buy a Honda Civic

Type R.

6.2 Honda CRV

6.2.1 The price of Honda CRV of Canada/UK

Fig. 27 Honda CRV sold in Canada Resource: https://www.honda.ca/

Fig. 28 Honda CRV sold in UK Resource: http://www.honda.co.uk/

The price of Honda CRV

In Canada, the price is staring from C$26,890.

In UK, the price is starting from £23,475.

COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 33

UK TO CANADA

The Sales Tax of Ontario

“For vehicles purchased privately within Ontario, RST is based on the purchase price or the vehicle's wholesale value (Red Book), whichever is greater. Specified vehicles without a

Red Book value (e.g., off road vehicles, boats, aircraft, etc.) are taxed at13% based on the purchase price.”

Resource: http://www.fin.gov.on.ca/en/tax/rst/

Honda CRV car tax

The lowest tax fee for the first year, which is £160, was chosen for this study.

Resource: http://www.nextgreencar.com/car-tax/make-model/honda/cr-v/

Assume the insurance keeps the same, the sum of price and tax is:

In Canada, C$26,890 * (1 + 13%) = C$30,385.7

In UK, £23,475 + £160 = £23,635 (for the first year)

6.2.2 The shipping costs from Canada/UK to the EU

From Canada/UK to the EU

Honda CRV’s body dimensions are 4.529m*1.819m*1.654m (l*w*h).

Resource: https://en.wikipedia.org/wiki/Honda_CR-V

A 20ft container’s dimensions are 6.04m*2.35m*2.39m (l*w*h), and the container are capable to ship a car with the max dimensions 5.75m*2.2m*2.2m (l*w*h).

Resource: http://www.movehub.com/uk/international-shipping/italy

Therefore, Honda CRV can fit a 20ft container. COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 34

UK TO CANADA

Also, the two shipping journeys ar from Alliston, ON, Canadato Genoa, Italy, and from Swindon, UK to Genoa, Italy.

Similarly, the shipping costs from Alliston to Genoa and from Swindon to Genoa are

US$2,500 and £1000, respectively.

6.2.3 The tariff from Canada/UK to the EU

From Canad/UK to the EU

Based on the prvious case’s analysis, the tariff fee of shipping a Honda CRV from

Alliston to Genoa and from Swindon to Genoa are 0, £2363.5 + 10% * insurance fee, respectively.

6.2.4 Currency consideration

Up to 19:02 UTC 19 August 2017, the British pound to US dollar exchange rate is

1.287.

Resource: http://www.x-rates.com/calculator/?from=GBP&to=USD&amount=1

Up to 19:02 UTC 19 August 2017, the Canadian dollar to US dollar exchange rate is

0.795.

Resource: http://www.x-rates.com/calculator/?from=CAD&to=USD&amount=1

6.2.5 Total Costs Comparison

From Canada to the EU

The price and tax to purchase a Honda CRV in Canada is C$30,385.7 =

US$24,151.93 COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 35

UK TO CANADA

The shipping cost from Alliston to Genoa is US$2,500

The tariff from Canada to the EU is 0.

So, the total cost is US$36,724.47 + US$2,500 + 0 + insurance fee = US$26,651.93 + insurance fee

From UK to the EU

The price and tax (for the first year) to purchase a Honda CRV in UK is £23,635 =

US$30,426.04

The shipping cost from Swindon to Genoa is £1000 = US$1,287.33

The tariff from UK to the EU is £2,363.5 + 10% * insurance fee = US$3,042.60 +

10% * insurance fee

So, the total cost = US$30,426.04 + US$1,287.33 + (US$3,042.60 + 10% * insurance fee) + insurance fee = US$34,755.97 + 1.1 * insurance fee

Assume the insurance fee remains the same, the total cost to purchase a Honda CRV from Canada to the EU countries, which is the sum of US$26,651.93 and insurance fee, is less than the total cost to purchase the same model from UK to the EU countries, which is the sum of

US$34,755.97 and 1.1 * insurance fee.

Comparison and Conclusion

For customers in Genoa, Italy, it’s more attractive to purchase a Honda CRV produced in Canada rather than that produced in UK. The conclusion can probably be extended COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 36

UK TO CANADA to the European Union that Canada is more attractive than UK in terms of if a European plan to buy a Honda CRV.

7. Conclusion and Recommendation

From the above analysis, it is found that current policy situation in Canada and UK is contrastive. On the one hand, benefiting from CETA, EU tariffs will be immediately eliminated on all Canadian auto parts, which will create enormous benefits for automotive industry in

Canada. On the other hand, in UK, “imported tariffs alone could push up the list price of cars imported to the UK from the continent by an average of £1,500 if bands and their retail networks were unable to absorb these additional costs.”

Resource: https://www.smmt.co.uk/industry-topics/brexit/

“The UK automotive sector relies greatly on the imported of parts, components and fully assembled vehicles.” The impact of Brexit “has already forced one manufacturer to increase its new car prices in order to stay profitable”, which will definitely decrease its allure at prices to consumers.

Resource: https://www.pwc.de/de/automobilindustrie/2016-11-15-brexit-topic- automotive.pdf

With the combination of CETA and Brexit, it is clear that Canada has more favorable environment for the development for automotive industry, especially for long-term investments.

The current policy situation in Canada is profitable for all auto manufacturers to launch or adjust a series of actions.

To date, there are five auto corporations in total in Canada, namely Toyota, Ford, General

Motors, Fiat Chrysler Automobiles (FCA) and Honda. By comparing the vehicle platforms for COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 37

UK TO CANADA aforementioned auto corporations located in Canada and UK, it is found that only Honda Canada and Honda UK share an identical vehicle platform, referred as Honda Civic platform, which is used to produce the same vehicle models, namely Honda Civic Type R and Honda CRV vehicles. In contrast, the other four auto corporations don’t have a same vehicle platform which could be used to produce same vehicle models in Canada and UK.

Furthermore, the total costs for potential consumers in EU purchasing a Honda Civic

Type R and a Honda CRV are calculated separately by taking into account the vehicle price, shipping cost, tariff fee and currency exchange rate. By comparing the total costs calculated, it is concluded that for potential consumers in EU it is more beneficial to purchase a Honda Civic

Type R or a Honda CRV from Canada, rather than from UK.

With the scope of my research, we can conclude that if Honda Motor Company makes some attempts to move Honda Civic platform, which produces Honda Civic Type R and Honda

CRV, from UK to Canada, it will be beneficial not only for the potential consumers in Canada, but also for European countries’ consumers who have the desire to purchase a Honda Civic Type

R or a Honda CRV.

Moreover, it is found that Honda Civic, Honda CRV and Honda Accord have occupied the top three slots among Honda’s best-selling vehicles for decades.

Resource: http://www.mattcastruccihonda.com/blog/what-are-hondas-most-popular- vehicles/

Furthermore, if Honda makes some attempts to move Honda Civic platform from UK to

Canada, it will be also favorable for Honda Motor Company itself.

Unlike the relatively negative impact from Brexit, as a consequence of the more favorable environment created by CETA, apart from Honda Motor Company, other motor COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 38

UK TO CANADA corporations, including Toyota, Ford, General Motors and Fiat Chrysler Automobiles (FCA), would also benefit from moving vehicle platforms from UK to Canada. These efforts will only benefit the related customers, but also profit the motor corporations.

ACKNOWLEDEMENT

I would like to thank my supervisor Prof. Grieg Mordue for the continuous guidance and support of my thesis’s research. His guidance has helped me in all the time of writing the thesis. I can’t complete the thesis without his helpful guidance and support.

COMBINATION OF BREXIT AND CETA - MOVING VEHICLE PLATFORMS FROM 39

UK TO CANADA

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