Brexit deal must be changed to stop critical blow to UK car industry, Vauxhall urges Sunak

One of the world’s largest carmakers has said it will be unable to keep their commitment to make electric vehicles in the UK without changes to the Brexit deal.

Stellantis – the parent company of Vauxhall, Citroen, Peugeot and Fiat – which employs more than 5,000 people in the UK – told a Commons inquiry into supply of batteries for EV manufacture that their UK investments were in the balance due to the terms of the trade deal, according to Independent.

The world’s fourth biggest car maker committed to making electric vehicles at its Ellesmere Port and Luton plants two years ago.

But in a submission to the inquiry, the company said the Brexit deal was a “threat to our export business and the sustainability of our UK manufacturing operations”.

It called on the government to reach agreement with the EU to maintain existing rules until 2027, rather than next year’s planned changes which state 45 per cent of an electric car’s value should originate in the UK or EU to qualify for trade without tariffs.

Stellantis said the rise in the cost of raw materials during the pandemic and energy crisis meant it was “unable to meet these rules of origin”.

It said the upcoming rules would see 10 per cent tariffs on trade with the EU and make domestic production and exports uncompetitive with Japan and South Korea.

The company said that would mean manufacturers “will not continue to invest” and will relocate.

“To reinforce the sustainability of our manufacturing plants in the UK, the UK must consider its trading arrangements with Europe,” Stellantis told the inquiry, listing Honda’s closing of its site in Swindon and investment in the US as examples of its impact.

We need to reinforce the competitiveness of the UK by establishing battery production in the UK

Stellantis said there will be “insufficient battery production” in the UK or Europe to meet government targets in phasing out petrol and diesel vehicles by 2025 and 2030.

“It we are unable to rely on sufficient UK or European batteries, we will be at a major competitive disadvantage. In particular against Asian imports,” they said.

“We need to reinforce the competitiveness of the UK by establishing battery production in the UK.”

Electric cars and batteries were among the final parts of the Brexit deal agreed between then Prime Minister Boris Johnson and President of the European Commission Ursula von der Leyen in 2020.

Sir Keir Starmer said the Brexit deal needed to be improved after the owner of Vauxhall said it will be unable to keep its commitment to make electric vehicles in the UK without changes to the trade agreement with the European Union.

Speaking to BBC Breakfast, the Labour Party leader said: “Look, we’re not going to re-enter the EU. We do need to improve that deal. Of course we want a closer trading relationship, we absolutely do. We want to ensure that Vauxhall and many others not just survive in this country but thrive.

“Because there are jobs bound up, there are families watching this morning either employed by Vauxhall or a similar place who are deeply worried about what this means.

“So yes we need a better Brexit deal. We will make Brexit work. That doesn’t mean reversing the decision and going back into the EU but the deal we’ve got, it was said to be oven-ready, it wasn’t even half-baked.

“So of course we’ve got to repair that along with all the other things we’ll have to repair if and when we are privileged to come into government.”

Sir Keir said there was “too much by way of barriers”, saying they needed to be torn down in any update to the Brexit deal. He said a future Labour government would look to “make things here in Britain” to ensure a strong domestic supply chain.

An economics academic has warned there is an “existential threat to the UK car industry”.

Professor David Bailey, professor of business economics at the Birmingham Business School, said increased tariffs and stricter rules in post Brexit trading agreements will put British manufacturers at a competitive disadvantage.

From 2024 cars must include 59 per cent locally produced materials and components, such as batteries, to avoid a 10 per cent export tariff on cars exported to the EU from the UK.

“I think there is a kind of existential threat to the UK car industry,” he told the Today programme.

“The rules in the Brexit agreement don’t help the UK car industry either. If they can’t meet those rules, they’ll face a 10 per cent tariff on cars made in the UK and exported to the EU and vice versa. That will put the UK at a competitive disadvantage.”

He added: “Car makers have been saying for some time, they can’t meet those rules as they tighten up, and they’re going to potentially be facing tariffs.”