The UK is in discussions with the EU over a Brexit deal that could end in disaster for the country’s car makers. The rules would reportedly make UK electric cars more expensive.
PM Rishi Sunak is looking for a swift resolution to the Trade and Co-operation Agreement (TCA) the UK has with the EU. The Prime Minister is pushing for some rule changes before the agreement’s deadline. Otherwise, the future of the UK’s electric vehicles will suffer.
Sunak raised concerns about the TCA. Trade Secretary Kemi Badenoch also included her voice in the issue. This was after Stellantis said it won’t be able to honor their agreement with the deal’s current iteration.
The automaker, which owns Vauxhall, Citroen, and Fiat, said the deal puts its factories at risk. The company revealed it could face a 10% tariff on exports to the EU. This is because of the policies on where parts are then made and sold.
Companies that do not meet the deal’s requirements are subject to the tariff. This would render their products uncompetitive.
Current policies state that 40% of the EV’s value must be from the EU or the UK. Doing this qualifies the car maker to trade without tariffs. The percentage is set to go up though. It will increase to 45% in 2024. The threshold for battery packs will be around 60%.
The percentage will go up again starting in 2027. It will become 55% of the EV’s value and 70% of the value of the battery packs.
Citroen and Fiat’s mother company says it cannot meet the rules of origin now. The company said this is because of the price increase of energy and raw materials.
The European Automobile Manufacturers' Association has also requested an extension. Europe's premier car trade group said the supply chain isn’t ready for the demands.
Germany’s powerful car lobby group, the VDA, also added their voices to the demand for an extension. It’s asking to move the deadline to at least three years.
The VDA’s support is a welcome one. It counts among its member's powerful carmakers like BMW. Mercedes-Benz, Porsche, and Volkswagen are also part of the VDA.
The UK is a profitable market for Germany’s carmakers. But it is a small drop when compared to the group’s global sales.
PM Sunak told reporters during the G7 summit in Japan that the impending deadline is a big concern. He said that car manufacturers across Europe have also shown their apprehension.
Sunak said they’re now engaged in a discussion with the EU. He said they’re looking into how to address the concerns raised by the auto industry.
Mike Hawes of the Society of Motor Manufacturers and Traders (SMMT) is hoping for common sense. The chief executive of the trade group said they don’t need to renegotiate the entire Brexit deal. They only need a consensus that the EU won't carry out some policies. Especially those that were set to change in 2024.
Hawes noted how challenging it would be to ensure manufacturing plants remain competitive. It would be hard for a company to do when facing extra costs. He said it also threatens investments. Both current ones and those are still in the pipeline.
Fear of Missing Out
Many industry experts also worry about the UK’s chances of developing its own batteries. Their concerns do have merit as most investments are now slanted towards the US and China.
Hawes is confident the UK is still in the race. He said the country has all its engines fired up and ready to go. But he did admit that it’s time to hustle. The trade specialist said the last few years saw huge investments made. Most focused on mega factories and product allocation. He believes the UK can still get some of that. But he warned that that window of opportunity is starting to close.
PM Sunak appears more optimistic than Hawes though. He pointed out that Nissan made a billion-pound investment in the North East. It was for a battery manufacturing company.
Sunak said he would be discussing further investments in the UK with Nissan’s CEO. He'll also talk to other business leaders from Japan.
Not Everything Is About Brexit
Secretary Badenoch said the concerns raised by carmakers aren't about Brexit.
The trade leader said the car makers are more focused on the rules of origin. It’s an issue that the EU is also anxious about due to the rising costs of components.
Badenoch emphasized to the Commons that the issue isn’t about Brexit trade. It’s about the supply chain. She said there have been problems after the pandemic. The ongoing war between Russia and Ukraine is also making things more difficult.
Badenoch also gave assurances that they are working on a resolution. She said she has had several meetings with her trade counterpart in the EU. They are talking things through and figuring out how to review the issue.
The UK isn’t lacking in investments though. Japanese companies have committed to investing in the UK. This was already revealed before the G7 summit. These investments reportedly cost around £18 billion.
Sunak added that these would result in more job creation. The funds are also earmarked for offshore wind and clean-energy projects. It would also be for its affordable housing projects.
The prime minister said the investment is an enormous vote of confidence.
Labour has a different perspective though. The group said foreign investment in the country dropped during the Conservatives’ time.