UK Lobbying EU Over Brexit Trade Deal Deadline Threatening Car Industry
The UK is actively lobbying the EU to address a Brexit trade deal deadline that carmakers warn poses a significant threat to the UK automotive industry.
Prime Minister Rishi Sunak confirmed that the UK is "engaged in a dialogue" with the EU about an impending rule change that could impact the future of UK electric vehicle production. Both British and European car manufacturers have called for a postponement of this rule change.
Stellantis, the owner of brands including Vauxhall, Peugeot, Citroen, and Fiat, has expressed concerns that its UK factories are at risk. The company, which had planned to manufacture electric vans in the UK, now warns these plans are jeopardized. Stellantis has indicated it might face 10% tariffs on exports to the EU due to new rules regarding the sourcing of parts.
Currently, 40% of the value of an electric vehicle must originate in the UK or EU to qualify for tariff-free trade. This requirement will increase to 45% next year and to 60% for battery packs. By 2027, the threshold will rise further to 55% for vehicles and 70% for battery packs. Stellantis has stated that due to recent increases in raw material and energy costs, it is "now unable to meet these rules of origin."
The European Automobile Manufacturers' Association has also requested that the EU extend the deadline, citing unprepared supply chains.
While attending the G7 summit in Japan, Prime Minister Sunak acknowledged that the upcoming deadline is a concern raised by car manufacturers across Europe, not just in the UK. He confirmed ongoing discussions with the EU to address these industry concerns.
Mike Hawes, CEO of the Society of Motor Manufacturers and Traders (SMMT), emphasized the need for practical solutions, suggesting that a full renegotiation of the Brexit deal is unnecessary. Instead, a postponement of the new rules could suffice. Hawes warned that additional costs could undermine the competitiveness and future investments in UK manufacturing.
Industry experts are worried that the UK is lagging in developing its own battery manufacturing capabilities, especially with significant investments being made in the US, China, and the EU. While the UK still has a chance, the window for establishing competitive gigafactories is closing quickly.
Prime Minister Sunak highlighted Nissan's recent £1 billion investment in battery manufacturing in the North East as a positive sign. He plans to discuss further investment opportunities with Japanese business leaders.
Business and Trade Secretary Kemi Badenoch clarified that the challenges faced by the automotive industry are not solely due to Brexit but are also linked to global supply chain disruptions caused by the pandemic and the ongoing conflict in Ukraine. Badenoch has had discussions with her EU counterparts to review these issues.
In conjunction with Sunak's meetings in Japan, the UK government announced nearly £18 billion in investments from Japanese firms. These investments aim to create jobs and fund projects in offshore wind, clean energy, and affordable housing, which Sunak described as a "massive vote of confidence" in the UK economy. However, the Labour Party criticized the Conservative government, claiming that foreign investment in the UK has significantly declined under their leadership.