During the four years that the very difficult Brexit negotiations lasted, the automotive industry was at the heart of the discussions. Knowing that 80% of vehicles built in the United Kingdom are exported, the majority to the European Union (EU), and that a large proportion of spare parts come from the EU, obtain an agreement to exempt the sector from customs was a matter of survival. At the end of 2020, in the snatch and in the general relief of this industry, a compromise was found: no customs duties are imposed.
However, two and a half years later, the question is back on the carpet. Stellantis, the fourth largest manufacturer in the world, with a strong presence in the United Kingdom with its Vauxhall brand, is threatening to close its factories if the Brexit agreement is not renegotiated. In an emergency, the Minister of Business and Trade, Kemi Badenoch, spoke on Wednesday May 17 by videoconference with leaders of the French manufacturer. The meeting would have been “constructive”according to a source quoted by the BBC… Given that Stellantis has two factories and five thousand employees across the Channel, the political stakes are high for the British government.
The problem comes from technical but essential rules included in the Brexit agreement. To benefit from the exemption from customs duties, it is necessary to prove that the goods are “made in UK” (Or “made in EU” if it is an export in the other direction). Problem: with international supply chains and components coming from all over the world, when can a vehicle be considered to be “British” ? The Brexit deal gave the answer: 40% of the value of the vehicle parts must be manufactured either in the UK or in the EU.
“Manufacturers will relocate their factories”
But these rules are going to get tougher. In 2024, they increase to 45%, and in 2027 to 55%. For electric vehicles, it is even more complicated, with a specific rule for batteries: in 2027, these must be 70% manufactured either in the United Kingdom or in the EU.
However, this objective is now impossible to achieve, warns Stellantis. “There will not be sufficient battery production in the UK or Europe by 2025 or 2030, although this is a key requirement of the rules of origin in the agreement [sur le Brexit] », Stellantis points out in a note given to a British parliamentary committee in February, but only revealed on Tuesday. The UK has only one major battery plant under construction, near the Nissan plant in north-east England. In Europe, the projects are more advanced, but here again insufficient.
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