A no-deal Brexit would mean that no formal agreements are reached during the negotiations between the UK and the EU.
Last year, car exports represented a significant proportion of the staggering £77billion of goods Germany exported to Britain.
Cars imported to the UK could be liable for 10 per cent import tax following a no deal Brexit.
Steffen Behm from the Association of German Chambers of Commerce and Industry said should such a scenario arise, either the German exporter or the British importer would pay an increased tax.
The German Engineering Foundation (VDMA) is therefore concerned about the outcome of the Brexit negotiations.
Managing Director Holger Kunze said: “Britain is the fourth largest export market in the German mechanical engineering industry, but in the first eight months of this year exports have already fallen by six per cent.”
Europe’s business groups have increased pressure on Theresa May as they are concerned about a deal not being reached.
After a meeting with the Prime Minister on Monday, the Federation of German Industries (BDI) released a statement saying: “The transitional period companies have in mind differs from that of the British government.”
The BDI has said that it was setting up a task force of major companies to make provisions for the “serious case of a very hard exit”.
The Federation said the highly export-dependent auto industry would be heavily burdened if there was a ten per cent duty under World Trade Organisation (WTO) rules.
If the UK leaves the EU without a trade agreement in place, it will fall back on the WTO rules to deal with other countries.
They said that a hard Brexit would be “especially harming to the British automative industry”.
State Secretary at the Federal Ministry of Finance, Thomas Steffen, said: “We should all be prepared for the worst case actually happening in March 2019”.
If the Article 50 process fails, there would not be much time to work on alternative strategies before Brexit in March 2019.
Source : EXPRESS