Automaker warns over UK operations and calls for Brexit trade deal renegotiation

LONDON (AP) — The world’s fourth-biggest carmaker by sales has warned of a potential existential threat to large parts of the British car industry unless the government moves to alter the terms of its post-Brexit trade deal with the European Union.

In a submission to a parliamentary inquiry into the supply of batteries for electric vehicles released Wednesday, the parent company of Citroen, Fiat, Peugeot and Vauxhall said it may not be able to keep its commitment to manufacture its new fleet of vehicles in the U.K. without changes to the terms of the deal. It also urged the government to invest heavily in domestically produced batteries.

Stellantis said the deal represented a “threat” to its export business and the “sustainability” of its manufacturing operations. The company employs around 5,000 people in the U.K. and committed to make electric vehicles in the country two years ago.

The stark warning is likely to pile pressure on the Conservative government to seek changes to the trade deal that came into force at the start of 2021 when the U.K. formally left the economic structures of the EU, including the frictionless single market and customs union. Executives from Stellantis are due to meet with Britain’s business secretary, Kemi Badenoch, on Wednesday.

Though the trade deal ensured that tariffs would not be slapped on the export of goods from the U.K. to the EU, an array of often-complex non-tariff barriers has made it more difficult, and often more costly, for British businesses to sell their wares in the 27-nation bloc. Many manufacturers, such as BMW, Ford and Honda, have already scaled back or closed their operations in the U.K. in recent years.

Some of these barriers are being phased in over time. Stellantis said it wanted the current phase-in period to be extended until 2027, a move that would require the trade deal to be revised.

The company said cars made in Britain and exported to the EU face an onerous 10% tariff if the rules of origin aren’t met, making them uncompetitive against exports from other major car-producing regions such as Japan and South Korea.

“To reinforce the sustainability of our manufacturing plants in the U.K., the U.K. must consider its trading arrangements with Europe,” Stellantis said in its submission. “We need to reinforce the competitiveness of the U.K. by establishing battery production in the U.K.”

Car production in the U.K. remains way below levels before the pandemic at just over 775,000 units in 2022, compared with around 1.3 million in 2019, according to figures from the Society of Motor Manufacturers and Traders.

The trade body’s chief executive, Mike Hawes, backed up Stellantis’ warning regarding the rules of origin for batteries, which he said pose “a significant challenge” to manufacturers in the U.K. and in the EU as higher tariffs could diminish the pace at which consumers transition towards electric vehicles.

“At a time when every country is accelerating their transition to zero emission transport, and global competitors are offering billions to attract investment in their industries, a pragmatic solution must be found quickly,” he said

The leader of the main opposition Labour Party, Keir Starmer, said the post-Brexit trade deal needed revision, but insisted he wasn’t calling for the U.K. to rejoin the EU or its frictionless economic arrangements.

“That doesn’t mean reversing the decision and going back into the EU but the deal we’ve got, it was said to be oven-ready. It wasn’t even half-baked,” he told the BBC.

In 2016, the U.K. narrowly voted to leave the EU in a referendum. A general election has to take place by early 2025, with opinion polls suggesting Labour is on course to be the largest party.

Copyright © 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, written or redistributed.

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