Rishi Sunak’s government is lobbying the EU to delay a change in manufacturing rules as part of the Brexit trade deal after Vauxhall’s owner warned the company could close its UK factories.
Stellantis, Vauxhall’s parent company, said that without changes to Boris Johnson’s Trade and Cooperation Agreement (TCA), it would not be able to meet its commitment to manufacture electric vehicles in the UK.
Economy Minister Kemi Badenoch raised the issue in Brussels, the government said, and she held a pre-arranged meeting with Stellantis chiefs for Wednesday.
She has also raised the auto industry’s concerns about the TCA with Chancellor Jeremy Hunt and Secretary of State James Cleverly, according to Whitehall sources.
According to Bloomberg, the government is lobbying the EU to push back the deadline for changes in UK electric car production to 2024.
Labor leader Sir Keir Starmer said “we need a better Brexit deal” with the EU to ensure companies like Vauxhall can continue to operate in the UK.
The Vauxhall owner has urged the government to agree with the EU to keep the existing rules in place until 2027 – rather than the changes planned for 2024, which would require 45 per cent of an electric car’s value to come from the UK or the EU must in order to be eligible for duty-free trade.
Without compliance, UK-made cars would be subject to a 10 per cent duty, making domestic production and export uncompetitive with cars made elsewhere.
Stellantis – the parent company of Vauxhall, Citroen, Peugeot and Fiat, which employs more than 5,000 people in the UK – committed two years ago to manufacturing electric vehicles at its plants in Ellesmere Port and Luton.
But in response to a query from an MP, the company said the Brexit deal posed a “threat to our export business and the sustainability of our UK manufacturing operations”.
Stellantis said the increase in raw material costs means it is “unable to comply with these rules of origin.” Part of the problem is that a battery pack can represent up to half the cost of a new electric vehicle because the batteries are heavy and expensive to transport long distances.
A spokesman for No10 confirmed that Ms Badenoch “has already raised this with the European Commission – it has also been raised at official level and we hope to find a solution with the EU on this.”
When asked if the January 2024 deadline could be pushed back, Mr Sunak’s spokesman said: “We are looking at what solutions we can find to a problem that we know exists. I will not preempt the talks we are having about what I have to do with the EU.”
Downing Street said raw material costs for carmakers had skyrocketed after Brexit was signed for “a number of reasons”. “It’s a problem for manufacturers across Europe, not just here in the UK,” spokesman No10 said.
“I believe that the European car manufacturers organization ACEA itself said that the European battery industry is simply not reacting quickly enough [action] to comply with the more restrictive rules that will come into effect.”
The rules of origin for electric cars and batteries were among the final parts of the Brexit deal agreed in 2020 between then-Prime Minister Boris Johnson and European Commission Ursula von der Leyen.
Transport Minister Richard Holden had already indicated on Wednesday that “further optimizations” could be made to the agreement with the EU.
Mr Holden told LBC: “I am sure there is still more tweaking that could be done… If more work needs to be done, I am absolutely certain that the Secretary for Business and Trade will do so in the days and weeks to come.”
Sir Keir promised to the BBC that he would renegotiate the trade deal Breakfast that while rejoining the EU is not on the table, “we need to improve this deal”.
The Labor leader added: “Obviously we want a closer trade relationship, we certainly do.” We want to make sure that Vauxhall and many others in this country not only survive but thrive… So yes, we need a better one Brexit deal. We will make sure that Brexit works.”
Automakers said the UK needs to attract more battery production to secure the industry’s future.
But Andy Palmer, a former chief operating officer at Nissan, told BBC Radio 4 Today Program that the entire UK car sector – including 800,0000 – is at risk.
He said it was “impossible to meet local content regulations unless you source your battery in the UK or EU” but the “supply chain is currently non-existent” in the UK. “The cost of failure is very clear. There are 800,000 jobs in the UK, those jobs related to the automotive industry.”
Chancellor Jeremy Hunt indicated that there would soon be a development in battery production. “Watch this area because we are very focused on making sure the UK gets electric vehicles and manufacturing capacity,” he said at an event on Wednesday.
Mike Hawes – chief executive of the Society of Motor Manufacturers and Traders – also called for urgent action on the trading rules in the Brexit deal.
The industry chief said the rules of origin for batteries “pose a significant challenge for manufacturers on both sides of the English Channel”, adding: “A pragmatic solution must be found quickly.”
Professor David Bailey, professor of business administration at Birmingham Business School, warned on BBC Radio 4 that the issue of trade rules posed an “existential threat to the UK car industry”.