UK car industry not ready for post-Brexit rules of origin

At the risk of sounding like a broken record, the UK car industry is calling on the government to deliver an industrial strategy that creates attractive investment conditions for advanced automotive manufacturing.

Mike Hawes, ceo of the Society of Motor Manufacturers and Traders (SMMT) said on Wednesday that “at a time when every country is accelerating their transition to zero emission transport, and global competitors are offering billions to attract investment in their industries, a pragmatic solution must be found quickly.”

His comments come after Stellantis warned UK parliamentarians that “if the cost of EV manufacturing in the UK becomes uncompetitive and unsustainable, operations will close.” The carmaker’s statement highlighted the hardship manufacturers are about to face with the rules of origin requirements under the UK-EU trade agreement post-Brexit phasing in from 2024. To be eligible for zero-tariff trade, UK-made EVs must have 45% of their value originating in the UK or the EU in 2024. In 2027, the local content rule increases to 65%.

Stellantis operates two car plants in the UK – Ellesmere Port and Luton – employing over 5,000 people. It says due to “various external headwinds” including the price of raw materials, it’s unable to meet these rules of origin. This will add a 10% duty on its exports to Europe making them uncompetitive against Asian players. “This is a threat to our export business and the sustainability of our UK manufacturing operations,” the carmaker added.

Addressing the parliamentary consultation, Stellantis also noted that if manufacturers continue to source batteries from mainland Europe and China, higher logistics costs which will be passed onto consumers. In turn, this will affect EV affordability, Kallanish notes.

The trade deal negotiated after Brexit “unlocked some pent-up investment,” says Hawes. “However, the rules of origin for batteries pose a significant challenge to manufacturers on both sides of the Channel, with the prospect of tariffs and price increases.”

Stellantis is requesting the government to reach an agreement with the EU to keep the current rules of origin until 2027, basically delaying higher requirement levels by three years. It’s also asking it to review the pan-Euro-Mediterranean rules, particularly for Serbia and Morocco.

UK business and trade secretary Kemi Badenoch is said to be meeting Stellantis’ executive on Wednesday. A government spokesperson said Badenoch has raised the issue with the EU and is determined to ensure the UK remains “one of the best locations in the world for the automotive manufacturing, especially as we transition to electric vehicles.”

Ellesmere Port is planned to be the group’s first EV-only production plant, with output of electric small vans slated to start in H1 2023 after a major electrification revamp. It would manufacture models for Vauxhall, Citroën, Peugeot and Open. The Luton plant produces mid-sized commercial vehicles since 1986.  

Gabriela Farhangi UK