Prime Minister Rishi Sunak has said that the UK was “engaged in a dialogue” with the EU to negotiate a rule change that could cast doubt on the country’s electric cars’ future after Ford and Jaguar Land Rover joined Stellantis to warn about the “unrealistic” rules.
Stellantis, which also owns the Citroën, Peugeot, Fiat, DS, Jeep, Alfa Romeo, Maserati and Abarth brands, said that it was struggling to meet the trade and cooperation agreement’s (TCA) “rules of origin” that require 40 per cent of an electric vehicle’s parts by value to originate in the UK or EU in order for it to qualify for trade without tariffs.
The TCA, which was signed between London and Brussels in 2020 after Brexit, also stipulates the 40 per cent rule if the EVs are to be sold on the other side of the Channel without a 10 per cent trade tariff.
Now, the looming rule change is set to rise to 45 per cent next year and for batteries, it’s due to be upped to 60 per cent. From 2027 onwards, the minimum bar will go even higher — 55 per cent for the value of an electric vehicle and 70 per cent for battery packs.
Since most electric vehicle batteries are still imported from Asia, and batteries make up a large part of the cost of building a car, vehicles made in the UK are likely to fall foul of the rules.
PM Sunak, who’s attending the G7 summit in Japan currently, told reporters that the approaching deadline was “something that car manufacturers across Europe, not just in the UK, have raised as a concern”.
“As a result, we are engaged in a dialogue with the EU about how we might address those concerns when it comes to auto manufacturing more generally,” he added.
Stellantis’ and other manufacturers’ concerns
Stellantis employs more than 5,000 people in the UK, including 1,000 at its electric van factory in Ellesmere Port, Cheshire, and 1,200 at its Luton plant. On the other hand, Ford has invested £380m to grow its e-motor capacity at its plant in Halewood, Merseyside.
Stellantis said on Wednesday that without a rethink, it could be forced to shut some of its UK operations, putting jobs at risk in an industry that employs 800,000 people in Britain.
Ford joined in support, adding on Thursday that the requirement would add “pointless cost to customers wanting to go green”. A spokesperson said: “Tariffs will hit both UK- and EU-based manufacturers, so it is vital that the UK and EU come to the table to agree a solution.”
Jaguar Land Rover, the UK’s largest automotive employer, also came out with criticism of the rule, describing the current timing as “unrealistic and counterproductive”, and calling on the UK and EU to “quickly agree on a better implementation solution to avoid destabilising the industry’s transition to clean mobility”.
Mike Hawes, chief executive of the UK trade body, the Society of Motor Manufacturers and Traders (SMMT), said he hoped “some degree of common sense would prevail”.
“It doesn’t need a full renegotiation of the Brexit deal, it just needs an agreement that you won’t [implement] some of the rules that were due to change next year,” he told BBC.
“It’s hard to see how you can make sure that your plant is competitive for the long term if you’re facing these additional costs. It undermines the investments either that have been made or potentially will be made.”
This marks the first time carmakers have explicitly urged the UK for a renegotiation of the Brexit deal.
What could it mean?
Stellantis has said that it will have no choice but to wind down operations, putting thousands of jobs at risk. Recently, in a submission to a House of Commons inquiry into EV production, the Amsterdams-headquartered company warned that it could be forced to shut down factories if the cost of electric vehicle manufacturing in the UK “becomes uncompetitive and unsustainable”.
It said: “Manufacturers will not continue to invest and relocate manufacturing operations outside the UK. The closing of UK manufacturing will see significant job losses, the loss of a skilled workforce and a negative impact to the UK economy.”
Labour leader Sir Keir Starmer has also chimed in on the debate, claiming that the country needs “a better Brexit deal” to ensure firms such as Vauxhall could continue operating in the UK.
Meanwhile, besides EV production, this poses even bigger questions for UK’s autonomy and sustainability in battery production. Britishvolt, a UK startup manufacturer of lithium-ion batteries, has claimed that Britain’s “battery industry has been doomed by the government”.
The company’s co-founder said that the country has missed its window of opportunity to build its own battery industry, and the government, including Rishi Sunak, is largely to blame.
The chair of the European battery manufacturer InoBat, also told BBC that 800,000 jobs in the UK associated with the car industry were under threat. “If you can’t meet these local content rules if you don’t have battery capability in the UK, then those car manufacturers will move to mainland Europe,” he said.
Although many companies – including Stellantis – are in a race to build “gigafactories” to make car batteries in the UK, with one major project already underway in Sunderland, most of those will not be ready for 2024. This means carmakers across Europe will continue to be reliant on imports from the dominant Asian battery makers.
To put it simply, there could very well be a supply-chain issue looming on the horizon for the manufacturers, not just in the UK but across Europe because the auto industry, which has been one of the most vocal critics of Brexit, believes there will not be a level playing field as agreed in the TCA.
“If we are unable to rely on sufficient UK or European batteries, we will be at a major disadvantage. In particular against Asian imports, specifically South Korea, Japan and also China,” Stellantis said.