Why are leading carmakers urging UK to overhaul Brexit deal?

Three major auto manufacturers have urged the UK government to reconsider its Brexit agreement with the European Union (EU) to modify rules they say pose a threat to the production of electric vehicles (EVs) in the UK.

Stellantis, the company behind Vauxhall, has raised concerns that without these alterations, it will be unable to fulfill its pledge to produce EVs in the UK. Ford has labeled the current rules as a needless expense, and Jaguar Land Rover, the leading automotive employer in the UK, argued that the timeline for the new rules is impractical.

The trade and cooperation agreement (TCA) between London and Brussels, signed in 2020, is now a contentious topic, particularly regarding its "rules of origin". These stipulate that to qualify for tariff-free trade, 40% of an EV's parts by value must originate from the UK or EU. This is set to rise to 45% next year, and by 2027, the threshold will be 55%, with the battery pack also needing to come from the UK or EU.

Manufacturers like Stellantis, which also owns several other automotive brands, and employs over 5,000 people in the UK, are finding these rules challenging to meet. Failure to comply results in a 10% tariff on finished vehicles sold across the Channel, making competition with cheaper Asian models difficult.

Stellantis and Ford are requesting a renegotiation of the agreement with the EU, suggesting a delay of the rule changes until 2027 and the improvement of battery production capacity respectively.

If the TCA isn't revised, Stellantis warns it might have to wind down operations, putting thousands of jobs in jeopardy. It stated that if EV manufacturing in the UK becomes uncompetitive and unsustainable, it will result in operations closure, significant job losses, and detrimental effects on the UK economy.

Industry experts have echoed these concerns, highlighting the existential threat to the UK car industry and potential job losses in the hundreds of thousands.

While the automotive industry had voiced concerns about Brexit earlier, predicting cost escalations, the focus now is on the shift towards electric vehicles. Stellantis states that under current rules, there won't be sufficient battery production supplies in the UK or Europe by 2025 and 2030 to meet the TCA requirements.

Many companies, including Stellantis, are rushing to establish 'gigafactories' for car batteries in the EU, with a significant project underway in Sunderland, UK. However, most of these will not be ready by 2024, maintaining Europe's reliance on Asian battery imports and leaving the industry on uneven ground.

Stellantis had previously shown faith in post-Brexit UK by investing £100m for EV production in Ellesmere Port. However, since then, soaring raw material prices and other external pressures, partly due to Russia's invasion of Ukraine, mean it can no longer afford the proposed UK and EU production minimums.