By Faisal Islam
Economics editor
One of the world’s biggest carmakers has warned it may have to close UK factories if the government does not renegotiate the Brexit deal.
Stellantis, which owns Vauxhall, Peugeot, Citroen and Fiat, had committed to making electric cars in the UK, but says that is under threat.
It warned it could face tariffs of 10% on exports to the EU due to rules on where parts are sourced from.
The government said it was “determined” UK car making will remain competitive.
“If the cost of electric vehicle manufacturing in the UK becomes uncompetitive and unsustainable, operations will close,” Stellantis said.
It is the first time a car firm has openly called on the government to renegotiate the terms of the Brexit trade deal.
Stellantis called on ministers to come to an agreement with the EU to keep rules as they are until 2027, and it also wants arrangements for manufacturing parts in Serbia and Morocco to be reviewed.
Business and Trade Secretary Kemi Badenoch had a virtual meeting with senior executives from Peugeot/Citroen parent company Stellantis this morning.
Sources described the meeting as constructive and also said that conversations with the EU led them to be cautiously optimistic that the EU also recognises a deal to defer a January 2024 cliff edge – when 55% of an electric cars components by value must come from the UK or EU to avoid tariffs – would be in both parties interest as many manufacturers in the UK and EU are facing difficulties sourcing batteries.
Decisions on whether to defer that requirement or amend the existing trade agreement were the responsibility of the Treasury and the Foreign Office.
The BBC understands that all major car manufacturers in the UK have raised similar concerns with the government.
Just two years ago, the world’s fourth biggest car maker said the future of its Ellesmere Port and Luton plants was secure.
But in a submission to a Commons inquiry into electric car production, the firm said current trade rules posed a “threat to our export business and the sustainability of our UK manufacturing operations”.
From next year, 45% of the value of an electric car should originate in the UK or EU to qualify for trade without tariffs. This will rise to 65% in 2027.
But Stellantis said it was “now unable to meet these rules of origin” due to the recent surge in raw material and energy costs.
If the government cannot get an agreement to keep the current rules until 2027, exports of its UK-made cars “would be subject to 10% tariffs” from next year, it said.
This would make the UK an uncompetitive place to manufacture cars compared with Japan and South Korea, it added.
“To reinforce the sustainability of our manufacturing plants in the UK, the UK must consider its trading arrangements with Europe,” Stellantis said
They added that ministers will take “decisive action to ensure future investment in zero emission vehicle manufacturing” in the coming months.
But Labour’s shadow business secretary Jonathan Reynolds said car makers had been let down by a “government in chaos”.
He added that “the jewel in the crown of British manufacturing is at risk without urgent action from the government”.
‘Uncompetitive’
Trading rules around electric cars were one of the very last issues settled in the Brexit negotiations between then UK prime minister Boris Johnson and European Commission President Ursula von der Leyen in 2020.
But Stellantis warned the current rules meant there was a risk “manufacturers will not continue to invest” in the UK and could relocate their operations abroad.
It pointed to BMW’s decision to make its new electric Mini in Germany, as well as Honda’s investment in the US after closing its UK site in Swindon.
Along with the trade barriers, a core problem remains the lack of electric car battery plants in the UK.
The US, China and the EU are also pouring subsidies into electric car making and there are fears that the UK will miss out on a once-in-a-generation wave of investment in the shift to electric.
Gigafactory
Earlier this week, French President Emmanuel Macron hosted Tesla’s Elon Musk, who hinted he might invest in a battery plant – or gigafactory – in France.
The Spanish government is currently trying to woo the UK’s biggest car manufacturer, Jaguar Land Rover, into building a gigafactory in Spain. It had long been assumed the plant would be built in the UK.
Andy Palmer, a former Nissan executive and chairman of the battery start-ups Inobat and Ionetic, said the UK was “running out of time” to develop its own battery manufacturing industry.
“It’s basically impossible to meet those [EU] local content rules unless you’re sourcing your battery from a plant in the UK or in the EU,” he told Radio 4’s Today programme.
David Bailey, professor of business economics at the Birmingham Business School, said: “If we don’t make batteries at scale in the UK, we won’t have a mass car industry.”
He added that although the government under Boris Johnson wanted a gigafactory built in the UK, “essentially there’s no industrial policy to back that up”.
Industry insiders say that EU carmakers themselves may struggle to meet the new rules of origin when they are phased in next year, and this might mean the bloc is open to renegotiating them.
However, the rules are due to tighten again in 2027, and experts believe UK exporters will find it impossible to export cars tariff free at that point unless they can source batteries domestically.
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Source: BBC News | Read More
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