Ford, Vauxhall owner and JLR call for UK to renegotiate Brexit deal

Ford, Vauxhall owner and JLR call for UK to renegotiate Brexit deal

18 May    Finance News, News

Three big global carmakers have called on the UK government to renegotiate the Brexit deal, saying rules on where parts are sourced from threaten the future of the British automotive industry.

Ford and Jaguar Land Rover have joined Stellantis, which owns the Vauxhall, Peugeot and Citroën brands, to warn the transition to electric vehicles will be knocked off course unless the UK and EU delay stricter “rules of origin”, due to kick in next year, that could add tariffs on car exports.

Current post-Brexit rules require 40% of an electric vehicle’s parts by value to be sourced in the UK or EU if it is to be sold on the other side of the Channel without a 10% trade tariff.

This proportion is due to rise to 45% next year, and because 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 and the EU are likely to fall foul of the rules.

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, which makes electric cars in Germany and parts in the UK, said on Thursday 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, joined the chorus, describing the current timing as “unrealistic and counterproductive”, and calling on the UK and EU to “quickly agree a better implementation solution to avoid destabilising the industry’s transition to clean mobility”.

It was the first time carmakers had explicitly urged a renegotiation of the Brexit deal.

Manufacturers are putting pressure on both the EU and the UK to come to the table, demanding the threshold increase be at least delayed until 2027 to allow time for European factories to start producing enough batteries to reduce reliance on Asia.

In a bid to reassure manufacturers, the chancellor, Jeremy Hunt, told business leaders at the British Chambers of Commerce annual conference on Wednesday: “Everyone is trying to develop supply of EV batteries, and so we need to have that supply here in the UK. The closer it’s located to the factories that are making the rest of the car, the better.

“And all I would say is, watch this space, because we are very focused on making sure the UK gets that EV manufacturing capacity.

Stellantis has raised doubts about the viability of its plants at Ellesmere Port and Luton, saying tariffs will make it more expensive to produce cars in the UK than in Japan or South Korea. Its plant at Ellesmere Port, which is due to start electric vehicle production later this year, employs 1,000 workers, while 1,200 are employed in Luton making Vauxhall and Fiat vans. Thousands more people are employed in the UK in businesses that supply parts to the plants.

“To reinforce the sustainability of our manufacturing plants in the UK, the UK must consider its trading arrangements with Europe,” Stellantis said, in a submission to a House of Commons inquiry into electric car production first reported by the BBC. It cited extra costs for the UK if it were forced to import batteries, adding: “If the cost of EV manufacturing in the UK becomes uncompetitive and unsustainable operations will close.”

Bosses from the manufacturer met the business secretary, Kemi Badenoch, on Wednesday to discuss the problem. The company also wants arrangements for manufacturing parts in Serbia and Morocco to be reviewed.

The trade deal is due to be renegotiated in 2025 as part of the original pact between the UK and the EU signed by Lord Frost in December 2020.

The effect of the rules of origin changes varies between carmakers. One car industry expert said Stellantis’s problems may stem from its decision to source batteries initially from China’s CATL, the world’s largest battery maker. Stellantis’s submission noted that it planned to “source batteries from mainland Europe and China”.

A government spokesperson said Badenoch “has raised this with the EU”.

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