Stellantis warns of the risks of the UK exiting electric car production under post-Brexit rules

LONDON — Executives from Stellantis, the auto giant behind brands including Peugeot, Chrysler and Citroën, are meeting with UK ministers on Wednesday to warn of a post-Brexit trading arrangement that seriously risks its operations in the country.

Stellantis manufactures Vauxhall, Fiat, Opel and other vehicles across two factories in the UK, employing more than 5,000 people. It plans to transition to majority production and then to 100% electric vehicle production while rolling out electrification across its brands.

In a report submitted to a government inquiry into the production of car batteries, the company said it would be at a competitive disadvantage going forward due to tariffs slated for batteries transported between the UK and Europe.

“If the cost of manufacturing electric cars in the UK becomes uncompetitive and unsustainable, operations will shut down,” the company said, citing previous decisions by the BMW Group to move production of Mini electric cars to China, and Honda’s investment in electric car production in the US after the shutdown. from its location in the United Kingdom.

The EU-UK Trade and Cooperation Agreement gave battery and electric vehicles a grace period before full rules of origin tariffs came into force, in response to these sourcing challenges. However, it will become progressively stricter in the coming years, rising to 45% and then 65% in terms of required domestic production. Otherwise, automakers face a 10% export duty on electric vehicles.

Stellantis said if it manufactured its batteries in China and mainland Europe in the coming years as currently planned, it would face “higher logistical costs” that would threaten the “sustainability of UK manufacturing operations”.

The company warned that the UK did not have sufficient supplies of the materials needed to support the production of car batteries. While this is also a problem in mainland Europe, with many supplies arriving from China, Stellantis noted that it has made significant investments in giant plants in France, Germany and Italy and has a battery joint venture there.

The government wants to negotiate with EU officials to maintain the current rules until 2027.

It comes as the European Union and its members ramp up their focus on electric vehicle production, with the formation of the European Battery Alliance and plans to relax state aid rules around green manufacturing, partly in response to US inflationary law.

Earlier this week, French President Emmanuel Macron hosted Tesla CEO Elon Musk to try to attract investment in the country.

The United Kingdom has made some progress in the production of electric vehicles and batteries, as it is planned to establish a large-scale lithium refinery in the north of England, and to build a giant battery factory along with a Chinese partner; But also instability, as battery maker Britishvolt was narrowly rescued from management earlier this year.

The committee session is its attempt to pave the way for the future of electric vehicle production in the country, along with the Automotive Transformation Fund.

Andy Palmer, former Nissan chief operating officer and head of electric battery maker Inobat, told the BBC Wednesday: “We’ve been sleeping at the wheel when it comes to bringing battery plants to the UK.”

Mike Hawes, CEO of the Association of Automotive Manufacturers and Traders, said rules of origin for batteries pose “a significant challenge for manufacturers on both sides of the channel, with potential tariffs and price increases that discourage consumers from buying the vehicles needed to meet climate change goals.”

Matthias Heck, chief credit officer at Moody’s Investors Service, told CNBC that many companies are seeking to set up electric vehicle battery manufacturing facilities near their auto plants due to the complexity of the auto industry’s supply chains, with many parts crossing international borders, and sometimes several. times.

This includes the likes of Stellantis in a joint venture with Mercedes-Benz, Total, Volkswagen and Tesla, Heck said. Meanwhile, EU projects benefit from local government subsidies and support, as well as proximity to factories in France and Germany.

“In countries where this is not possible, automakers rely on competitively priced and logistical cost battery imports. Otherwise, they may not be able to produce cost-competitive battery electric vehicles for imports from other countries.”