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Brexit and the Trade and Cooperation Agreement: Stellantis Cries for Changes to Avoid UK Car Industry Crisis

 Stellantis N.V., together with other carmaker companies, has recently urged the British government to renegotiate its Brexit agreement with the EU to reduce the extra costs of production and shipment resulting from the new regulations created by the EU-UK Trade and Cooperation Agreement (TCA) signed in 2020. The world's number three biggest carmaker company, the owner of brands such as FIAT, Peugeot, Citroen, and Vauxhall, has warned the government through an inquiry to the House of Commons that "if the cost of EV manufacturing in the UK becomes uncompetitive and unsustainable, operations will close." The inquiry highlights that the consequences of the new regulations would have a catastrophic impact on the company and the UK car industry as "manufacturers will not continue to invest and relocate manufacturing operations outside the UK. The closing of UK manufacturing will see significant job losses, the loss of a skilled workforce, and a negative impact on the UK economy."


How do the new TCA regulations affect the UK Electric Vehicles industry?


As the UK car industry slowly starts to increase the production of Electric Vehicles, the new TCA regulations might become a huge obstacle to the success of the whole manoeuvre. Indeed, the new TCA regulations have created an existential crisis for the British car industry's shift towards electric vehicles due to a lack of battery supply and production on British soil.


Due to the "Rules of Origin tariffs" stipulated in the 2020 trade agreement, 45% of an electric vehicle's value must come from the UK or Europe by 2024 to avoid extra costs and tariffs. UK carmakers who won't comply will have to pay taxes of 10% when selling their electric vehicles abroad. 


Consequently, this will put UK carmaker companies at a huge disadvantage when competing with other cheaper Asian products from rival companies. Indeed, if the production and logistical movement of battery packs count for half of an electric vehicle's cost, it becomes tough for car companies such as Stellantis to keep the UK production open while they can invest in cheaper manufacturing sites in other European countries.


Andy Palmer, former chief operating officer at Nissan and chairman of European battery manufacturer InoBat, revealed that "the cost of failure is very clear. It's 800,000 jobs in the UK, which is basically those jobs associated with the car industry. If you don't have a battery capability in the UK, then those car manufacturers will move to mainland Europe." 


The British Government's response


Questioned on the issue, UK Prime Minister Rishi Sunak confirmed his full trust in Brexit, declaring, "I believe in Brexit; I voted for Brexit." Indeed, while travelling to the G7 summit in Japan, the Prime Minister recalled the many "Brexit benefits" introduced through his reforms during his mandate as chancellor. Moreover, although the issues raised by Stellantis weren't directly concerned, he reassured that his government would do anything in its power to maintain the UK car-making industry competitive worldwide.


On the other side, Labour leader Sir Keir Starmer said that his party would renegotiate a better deal with the EU to help companies like Stellantis hold their manufacturing sites in the UK while remaining competitive. The political leader stated: "I don't think many people look at that deal and think it's working very well. We were promised an oven-ready deal, and we got something that was, frankly, half-baked".


Ultimately, internal sources have told the BBC that the Business and Trade Kemi Badenoch had a constructive conversation with a delegation of the Stellantis group resulting in a positive step towards finding concrete solutions together with the EU.


 


 


 


 


 


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Tags: UK Brexit TCA ElectricVehicles CarIndustry Stellantis



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