…By Lola Smith for TDPel Media.
The UK government is engaging in talks with Brussels regarding a Brexit trade deal deadline that poses a significant threat to the British automotive industry, potentially jeopardizing thousands of jobs.
Business and Trade Secretary Kemi Badenoch and UK officials have raised concerns with their counterparts in Brussels ahead of the approaching deadline at the beginning of 2024, which will introduce new regulations for electric vehicles (EVs).
Stellantis Raises Concerns Over EV Manufacturing Commitment
Stellantis, the parent company of Vauxhall, informed Members of Parliament (MPs) that it will be unable to fulfill its commitment to manufacturing EVs in the UK without changes to the Trade and Cooperation Agreement (TCA) with the European Union.
Under the current terms of the TCA, starting next year, 45% of an EV’s value must originate in the UK or EU to qualify for tariff-free trade.
Failure to meet these requirements would result in a 10% tariff on cars sold in the EU, making them uncompetitive.
Downing Street Hopes for Resolution with the EU
A spokesperson from Downing Street expressed the hope for a resolution with the EU on this matter.
The spokesperson acknowledged that raw material costs for manufacturers have increased since the signing of the TCA and emphasized that the European battery industry has not developed quickly enough to comply with the stricter rules.
The Business Secretary has already raised these concerns with the European Commission, and discussions are ongoing.
Increasing Requirement and Future Challenges
Beginning in 2027, the requirement for locally sourced content is set to increase further to 55%, with additional restrictions on batteries.
Chancellor Jeremy Hunt highlighted global pressure on the supply of batteries for electric vehicles but hinted at forthcoming announcements regarding the UK’s EV manufacturing capacity.
Stellantis Warns of Potential Impact on UK Investments
Stellantis, which also owns Citroen, Peugeot, and Fiat, employs over 5,000 people in the UK.
The company indicated that UK investments are at risk due to the terms of the trade deal.
Representatives from Stellantis held talks with Business Secretary Kemi Badenoch to address wider concerns about the impact of rules-of-origin restrictions.
Industry Calls for Pragmatic Solution
Mike Hawes, CEO of the Society of Motor Manufacturers and Traders (SMMT), stressed that the rules of origin for batteries pose a significant challenge, potentially resulting in tariffs and price increases that discourage consumers from purchasing electric vehicles.
Hawes emphasized the need for a pragmatic solution, especially as countries worldwide are accelerating their transition to zero-emission transport.
Existential Threat to UK Car Industry
Professor David Bailey from Birmingham Business School warned that without UK manufacturing of EV batteries, there is an existential threat to the UK car industry.
Car manufacturers have been unable to meet the tightening rules of origin, leaving them vulnerable to potential tariffs.
Stellantis Urges Government Action and Industrial Strategy
In its submission to the Commons Business and Trade Committee, Stellantis described the Brexit deal as a threat to its export business and the sustainability of its UK manufacturing operations.
The company called on the government to reach an agreement with the EU to maintain existing rules until 2027, rather than implementing planned changes next year.
Stellantis expressed its inability to meet the rules of origin due to increased raw material costs and urged that failure to do so would lead to a lack of investment and potential relocation.
Concerns Raised by MPs and Union
MP Justin Madders, representing Ellesmere Port, expressed concerns over the future trading arrangements and the lack of an industrial strategy, emphasizing the risks faced by the UK car industry.
Sharon Graham, general secretary of the Unite union, criticized the government for its failure to invest in battery factories and ensure a smooth transition to EV production in the UK.
Shadow Business Secretary Criticizes Government’s Handling
Shadow Business Secretary Jonathan Reynolds criticized the government, stating that manufacturers had been let down by a “Government in chaos.”
He described the situation as an indictment of a government that has failed to make Brexit work for businesses and capitalize on the opportunities presented by the green transition.