Stellantis, one of the world’s largest automakers, has issued a warning to the UK government, stating that parts of its car industry may be lost unless the Brexit deal is renegotiated. The company, known for its brands like Vauxhall, Peugeot, Citroen, and Fiat, had previously committed to manufacturing electric vehicles (EVs) in the UK. However, it now claims that it cannot comply with the trade rules outlined in the Brexit agreement regarding the sourcing of parts. The collapse of Britishvolt at the beginning of 2023 has played a significant role in this situation.
The UK government has responded to Stellantis’ concerns, assuring its commitment to keeping the country competitive in the car manufacturing sector. However, it is emphasized that without large-scale battery production in the UK, car companies will be unable to avoid costly tariffs on products like the new Vauxhall Astra Electric.
Under the current rules, starting in 2024, at least 45% of the value of an EV must originate locally to qualify for tariff-free trade. Stellantis has pointed out that it is currently unable to comply with these rules of origin due to the sharp rise in raw material costs during the pandemic and energy crisis. If the government fails to secure an agreement to maintain the current rules until 2027, trade between the UK and EU could be subjected to 10% tariffs, making domestic production and exports uncompetitive compared to countries like Japan and South Korea.
While a price difference of £2,000 may not seem significant in the high-end market, it can have a significant impact on sales volume in the £15,000 to £25,000 price range, where budget is a primary concern for consumers. Stellantis has urged the government to reach an agreement with the European Union (EU) to preserve the current rules until 2027 and to review manufacturing arrangements for parts in Serbia and Morocco.
Just two years ago, Stellantis had reassured the market that its Ellesmere Port and Luton plants were secure. However, the company now finds it necessary to request a renegotiation of the Brexit deal due to potential threats to its export business and the sustainability of its UK manufacturing operations. Stellantis made this appeal as part of its submission to a parliamentary inquiry into EV production, clarifying that its investments in the UK were based on meeting the stringent terms of the post-Brexit free trade agreement.
The potential impact of this situation goes beyond Stellantis, as other manufacturers like Ford, BMW (with its electric Mini), and Honda may also face difficulties due to uncompetitive EV costs. Stellantis emphasized the need for the UK to consider its trading arrangements with Europe to secure the sustainability of its manufacturing plants.
Kemi Badenoch has raised this issue with the EU, and the UK government has highlighted its determination to maintain the UK as a top destination for automotive manufacturing, especially during the transition to electric vehicles. The government has initiated a fund to develop the EV supply chain and plans to take decisive action in the coming months to ensure future investment in zero-emission vehicle manufacturing.
A core issue exacerbating the situation is the lack of battery plants in the UK and a domestic supply chain that lags behind developments in other countries. Concerns within the industry are growing as the UK risks missing out on significant investment opportunities associated with the electrification of cars. Subsidies from the US, China, and the EU further intensify competition, with potential investments from Tesla’s Elon Musk in France and the Spanish government’s efforts to attract a Gigafactory from Jaguar Land Rover.
While the Brexit trade agreement allowed for a phased implementation of strict rules of origin for EV parts, it is likely that UK exporters will face challenges exporting cars tariff-free from 2027 unless a local supply chain is quickly established. The BritishVolt project, with a successful buyout, could still prove useful in this regard.
Stellantis calls on UK Government to renegotiate Brexit agreement
In a bold move, Stellantis, one of the world’s leading automotive companies, has publicly called on the UK Government to renegotiate the Brexit agreement. The call comes as the company faces significant challenges resulting from the trade deal between the United Kingdom and the European Union.
Stellantis, formed through a merger between French automaker Groupe PSA and Italian-American car manufacturer Fiat Chrysler Automobiles, boasts an extensive portfolio of iconic brands including Peugeot, Citroën, Vauxhall, and Jeep. The company’s plea for a renegotiation stems from concerns over the detrimental impact the current Brexit agreement is having on their operations and overall business performance.
One of the key issues highlighted by Stellantis is the imposition of tariffs on vehicles and components, resulting in increased costs for both the company and its customers. These additional expenses have directly affected Stellantis’ ability to remain competitive in the UK market and have put the company at a disadvantage compared to its competitors. With the automotive industry already grappling with the challenges posed by the COVID-19 pandemic, the burden of tariffs further exacerbates the strain on the sector.
Furthermore, Stellantis emphasizes the importance of maintaining seamless supply chains and logistics between the UK and EU. The current arrangements, according to the company, have introduced unnecessary complexities and delays in their operations, hindering their ability to efficiently manufacture and distribute vehicles. This disruption not only affects Stellantis but also has potential ramifications for suppliers, dealerships, and, ultimately, customers.
By urging the UK Government to enter into renegotiations, Stellantis demonstrates its commitment to long-term investment in the UK market and highlights the importance of a favorable business environment. The company recognizes that a renegotiated agreement could help remove the existing barriers and smooth the path for continued growth and success in the post-Brexit era.
The plea from Stellantis aligns with a growing chorus of concerns voiced by businesses across various sectors since the UK’s departure from the European Union. The gravity of these issues has become increasingly evident as companies continue to grapple with the disruptive effects of the trade deal. Stellantis’ call brings further urgency to the need for action, as it represents a significant player in the global automotive industry.
While the possibility of renegotiating the Brexit agreement may seem challenging, it is essential for the UK Government to carefully consider the concerns raised by Stellantis and other businesses. A mutually beneficial resolution could have far-reaching benefits, not only for Stellantis but also for the wider UK economy.
As the automotive industry undergoes a transformative phase with the shift towards electric and sustainable mobility, it becomes even more critical to create the optimal conditions for investment and innovation. A revised agreement that ensures a frictionless trade relationship between the UK and the EU would help boost the industry’s competitiveness and facilitate the adoption of emerging technologies.
Stellantis’ public call to renegotiate the Brexit agreement serves as a reminder that the current deal presents challenges that need urgent attention. The UK Government must listen to the concerns of companies like Stellantis and adopt a proactive approach to addressing these issues. Such actions will support the growth and success of the automotive industry while being an essential step in shaping a prosperous post-Brexit future.