UK car giant warns Brexit could force factory closures – BBC News Arabic

  • Written by Faisal Islam
  • Economics Editor

One of the world’s largest automakers has warned that it may be forced to close factories in the United Kingdom if the government does not renegotiate its Brexit deal with the European Union.

Stellantis, which owns Vauxhall, Peugeot, Citroen and Fiat, has pledged to make electric cars in the UK, but says that is at risk.

It warned that it could face a 10% tariff on exports to the EU due to rules on the sourcing of spare parts.

The government said it was “insistent” that the UK car industry remained competitive.

“If the cost of manufacturing electric cars in the UK becomes uncompetitive and unsustainable, operations will shut down,” Stellantis said.

This is the first time a car company has publicly called on the government to renegotiate the terms of the Brexit deal.

Stellantis has called on ministers to reach an agreement with the European Union to keep the rules in place until 2027, and she also wants to review arrangements for parts manufacturing in Serbia and Morocco.

Just two years ago, the world’s fourth-largest automaker said the future of its Ellesmere and Luton plants was secure.

But in a submission to the House of Commons inquiry into electric vehicle production, the company said existing trade rules posed “a threat to our export business and the sustainability of UK manufacturing operations”.

From next year, 45% of the value of an electric vehicle must originate in the UK or EU to qualify for tariff-free trade. This will increase to 65% in 2027.

But Stellantis said it is now “unable to meet these rules of origin” due to recent hikes in raw material and energy costs.

It said if the government could not secure an agreement to maintain the current rules until 2027, exports of its British-made cars would be “subject to a 10% tariff” from next year.

She added that this would make the UK a non-competitive place to manufacture cars compared to Japan and South Korea.

β€œTo enhance the sustainability of our UK factories, the UK must look into its trading arrangements with Europe,” said Stellants.

A government spokesman said Business and Trade Minister Kemi Badnoch had “raised this with the EU”.

“She is determined to ensure the UK remains one of the best locations in the world for car manufacturing, especially as we move to electric vehicles,” said a spokesperson for Ms Badnoush, who will meet Stellantis officials on Wednesday.

They added that the ministers would take “decisive measures to ensure future investment in zero-emissions vehicles” in the coming months.

But Labour’s shadow business secretary Jonathan Reynolds said carmakers had been let down by “a government in disarray”.

“The crown jewel of British manufacturing is at risk without urgent action from the government,” he added.

Unable to compete

Trading rules around electric cars was one of the last issues to be settled in the Brexit negotiations between then British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen in 2020.

But Stellantis warned that the current rules meant there was a risk “manufacturers will not continue to invest” in the UK and could move their operations abroad.

He pointed to BMW’s decision to make its new mini electric car in Germany, as well as Honda’s investment in the US after closing its UK site in Swindon.

After a long period of trade barriers, the main problem remains the lack of electric vehicle battery plants in the UK.

The US, China and the European Union are also pumping subsidies into the electric car industry, and there are fears the UK could miss out on the once-in-a-generation wave of investment in electrification.

Giga Factory

Earlier this week, French President Emmanuel Macron hosted Elon Musk of Tesla, who hinted he might invest in a battery factory – or megafactory – in France.

The Spanish government is currently trying to co-opt the UK’s largest car manufacturer, Jaguar Land Rover, to build a mega-factory in Spain. It was long assumed that the plant would be built in the UK.

Andy Palmer, former Nissan CEO and head of battery startups Inobat and Ionetic, said the UK was “running out of time” to develop its own battery industry.

It is basically impossible to meet them [EU] Local content rules unless you are getting your battery from a UK or EU manufacturer.”

“If we don’t make batteries on a large scale in the UK, we won’t have a huge car industry,” said David Bailey, professor of business economics at Birmingham Business School.

He added that although the government under Boris Johnson wanted to set up a giant factory in the UK, “there is no industrial policy that supports this.”

Industry insiders say EU automakers themselves may struggle to meet the new rules of origin when they are implemented in phases next year, and that could mean the bloc is open to renegotiating them.

However, the rules are set to be tightened again in 2027, and experts believe British exporters will find it impossible to export cars without tariffs at that point unless they can buy the batteries locally.

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