Car industry woes ‘nothing to do with Brexit’, business secretary reveals

The car industry’s concerns that it cannot manufacture electric vehicles in the UK “isn’t to do with Brexit,” according to business secretary Kemi Badenoch.

As a deadline for tariffs approaches, the parent company of Vauxhall, Stellantis, has stated that without modifications to Boris Johnson’s trade agreement with the EU, it will be impossible to continue manufacturing in Britain.

After receiving concerns that the industry faces a “existential threat” from the impending 2024 deadline for new rules of origin that will force automakers to produce more batteries in the UK, Rishi Sunak has requested talks with Brussels.

The matter has been brought up by Ms. Badenoch with her EU equivalent. She stressed on Thursday, however, that the issue was not one related to Brexit but rather one of adhering to new regulations at a time of rising prices.

“The issue that the automotive industries are talking about is around rules of origin. This is something that the EU are also worried about because the costs of the components have risen,” she said in the Commons.

Ms Badenoch added: “This isn’t to do with Brexit – this is to do with supply chain issues following the pandemic and the war in Russia and Ukraine.”

However, the cabinet member later acknowledged that given Mr. Johnson’s Brexit Trade and Cooperation Agreement (TCA), the issues would be reviewed with the EU.

“I actually have had meetings with my EU trade counterpart, we are discussing these things and looking at how we can review them, especially as the TCA will be coming into review soon.”

One of the final components of the Brexit agreement reached between Mr. Johnson and the president of the European Commission, Ursula von der Leyen, in 2020 was rules of origin for batteries and electric vehicles.

Stellantis has urged the government to work with the EU to maintain current regulations through 2027 rather than the revisions that are anticipated for 2024, which would require that 45% of the value of an electric car originate in the UK or the EU in order to be eligible for tariff-free trade.

It is “impossible to meet local content rules unless you source your battery within the UK or EU,” according to Andy Palmer, a former chief operational officer of Nissan, but the “supply chain at the moment isn’t there.”

According to reports, the Sunak government is pleading with the EU to postpone a 2024 deadline for alterations in how much an electric car should be produced in the UK.

The British auto industry’s issues with the 2024 deadline may be resolved “within” the trade pact, No. 10 stated on Thursday, rather than necessitating a renegotiation of the agreement.

“We continue to want to work closely with the EU to find a solution to this problem,” said a spokesman for Rishi Sunak. “We think it can be resolved within the TCA, and we want to continue to take that work forward.”

Sir Keir Starmer has vowed to renegotiate the Brexit trade agreement, saying that while rejoining the EU was not on the table, “we do need to improve that deal”.

According to Labour frontbencher Jim McMahon, the Labour leader sees the present trade agreement with the EU as a “starting point” with “gaps that we need to fill.”

Mr. McMahon was questioned about if the party leader had implied he would “tear up” the accord and reopen discussions. He responded, “He certainly hasn’t said that. The deal is a framework and a starting point, but it’s not the end since there are inevitably holes that need to be filled, as he has made clear.

Additionally, German automakers have urged the EU to delay the post-Brexit regulations that threaten to increase tariffs and halt production.

The German auto industry’s lobbying group, VDA, declared that “urgent adjustments” to the trade agreement were required since any delays would put the European auto industry at a substantial competitive disadvantage to its Asian rivals.

While attending the G7 conference in Japan, Mr. Sunak stated that the UK and the EU were in discussions about how to address issues pertaining to auto production “more generally”.

“It’s something that car manufacturers across Europe, not just in the UK, have raised as a concern. And as a result of that, we are engaged in a dialogue with the EU about how we might address those concerns when it comes to auto manufacturing more generally.”

Nissan has also warned that producing electric vehicles at its Sunderland facility will be expensive due to rising energy prices and inflation.

Regarding worries about the capacity of the UK to produce batteries, Mr. Sunak stated: “Nissan has invested a billion pounds in the North East’s battery manufacturing capability. I’ll discuss investment in the UK with the CEO of Nissan and other top Japanese businessmen later.

The shadow business secretary for Labour, Jonathan Reynolds, cautioned that the “automotive sector has issued warning cry after warning cry that government policy risks shipping jobs overseas” as Ms. Badenoch made her remarks in the Commons.