Stellantis Calls for new Brexit Deal to Save UK Car Production

Stellantis has warned the UK government that it will cease all car manufacturing operations at its Vauxhall plant unless a new Brexit deal is cut with the European Union.

The carmaker said the decision would be forced upon it when new tariffs hit the production of BEVs under rules that mandate a percentage of locally sourced material for the vehicles to meet Brexit trade rules, the BBC reports. It has now called on the government to come to an agreement with the EU to keep rules as they are until 2027. Ford of Britain has also joined in the call to maintain current trading rules for the next few years.

The warning follows a similar assessment by the UK’s Society of Motor Manufacturers and Traders (SMMT) that the nation is at risk of falling behind in the race to transition towards  BEV mobility especially in the light of the UK’s commitment to stop sales of new ICE powered passenger cars by 2030. Stellantis also wants arrangements for manufacturing parts in Serbia and Morocco to be reviewed.

The issue revolves around the lack of domestically sourced ingredients for automotive battery production in the UK which has no gigafactories in existence while the EU has up to 35 of these battery factories in the process of being built or in production.

In a submission to a House of Commons inquiry into electric car production, the company said: “This is a threat to our export business and the sustainability of our UK manufacturing operations. To reinforce the sustainability of our manufacturing plants in the UK, the UK must consider its trading arrangements with Europe.

“If the cost of EV manufacturing in the UK becomes uncompetitive and unsustainable, operations will close. The closure of UK manufacturing will see significant job losses, the loss of a skilled workforce and a negative impact on the UK economy.”

Perversely, the Ellesmere Port area, home to Stellantis’s Vauxhall brand, had been one of the regions that voted in favor of leaving the EU during the UK’s 2016 European Referendum. The company said its UK investments were based on meeting the strict terms of the post-Brexit free trade deal. These rules state that, from next year, 45% of the value of the BEV should originate in the UK or EU to qualify for trade without tariffs. The deal on BEVs and batteries was one of the very last issues settled in Brexit negotiations between former prime minister Boris Johnson and the EU’s Ursula von der Leyen in 2020.

However, Stellantis said it was “now unable to meet these rules of origin” after the surge in raw materials costs during the pandemic and energy crisis. If the government cannot get an agreement to keep the current rules “trade between the UK and EU would be subject to 10% tariffs”, making UK production and exports uncompetitive in comparison to Japan and South Korea.

Stellantis also pointed to other manufacturers’ exodus from car production in the UK including Ford, BMW’s electric Mini and Honda’s investment in the US after closing its UK site in Swindon.

Ford joined in Stellantis’s warning over the EU’s tightening of ‘rules of origins’ for BEVs with Ford of Britain’s chairman Tim Slatter issuing a statement: “Since the UK-EU Trade and Cooperation Agreement was signed in 2020, Ford has invested heavily in electric vehicles across Europe. Ford’s drive to a fully electric future is spearheaded by more than £1.6 billion being invested in passenger vehicles to be built in Cologne, Germany. A further £380 million is growing e-motor capacity at Halewood, Merseyside.

“Today the industry does not have sufficient supply of locally-sourced batteries and components to meet demand. Tightening the trade rules at this point risks undermining the switch to EVs with tariffs and adding pointless cost to customers wanting to go green. Manufacturers who have invested heavily early in the transition will be hardest hit by tariffs because combustion engine vehicles will continue to move tariff-free.

“Ford has long supported the UK government’s zero emission vehicle (ZEV) mandate, prescribing the proportion of EV car and van sales from 2024. Introducing EV tariffs at the same time will undermine the mandate and slow the growing EV trend. Ford is calling for current trade requirements to be extended to 2027, to allow time for the battery supply chain to develop in Europe and to meet EV demand. 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.”

 

— Paul Myles is a seasoned automotive journalist based in Europe. Follow him on Twitter @Paulmyles_