Business secretary Kemi Badenoch has claimed the automotive sector’s fears it cannot make electric vehicles in the UK “isn’t to do with Brexit”.
Vauxhall’s parent company Stellantis has said it will be unable to keep manufacturing in Britain without changes to Boris Johnson’s trade deal with the EU as a tariff deadline approaches.
Rishi Sunak has ordered talks with Brussels after warnings of an “existential threat” to the industry posed by the looming 2024 deadline for new rules of origin which will require carmakers to build more batteries in the UK.
Ms Badenoch has raised the issue with her EU counterpart. But she insisted on Thursday that it was not a Brexit-related problem, and was instead about complying with new rules at a time of rising costs.
“The issue that the automotive industries are talking about is around rules of origin. This is something that the EU are also worried about because the costs of the components have risen,” she said in the Commons.
Ms Badenoch added: “This isn’t to do with Brexit – this is to do with supply chain issues following the pandemic and the war in Russia and Ukraine.”
But the cabinet minister then conceded the problems would be discussed with the EU in the light of the Mr Johnson’s Brexit Trade and Cooperation Agreement (TCA).
“I actually have had meetings with my EU trade counterpart, we are discussing these things and looking at how we can review them, especially as the TCA will be coming into review soon.”
Rules of origin of electric cars and batteries were among the final parts of the Brexit deal agreed between Mr Johnson and European Commission president Ursula von der Leyen in 2020.
Stellantis has called on the government to reach an agreement with the EU to maintain existing rules until 2027 – rather than 2024’s planned changes which state 45 per cent of an electric car’s value should originate in the UK or EU to qualify for trade without tariffs.
Andy Palmer, former chief operating officer at Nissan, said it was “impossible to meet local content rules unless you source your battery within the UK or EU” but the “supply chain at the moment isn’t there”.
The Sunak government is understood to be lobbying the EU to delay a 2024 deadline for changes in how much an electric car should be manufactured in the UK.
On Thursday No 10 said problems relating to the British car industry over the 2024 deadline can be resolved “within” the trade deal – rather than require a re-negotiation of the agreement.
“We continue to want to work closely with the EU to find a solution to this problem,” said a spokesman for Rishi Sunak. “We think it can be resolved within the TCA, and we want to continue to take that work forward.”
Sir Keir Starmer has vowed to renegotiate the Brexit trade agreement, saying that while rejoining the EU was not on the table, “we do need to improve that deal”.
The Labour leader views the current trade deal with the EU as a “starting point” with “gaps that we need to fill”, Labour frontbencher Jim McMahon said on Thursday.
Asked whether the party leader had meant he would “rip up” the agreement and start again with negotiations, Mr McMahon said: “He certainly hasn’t said that. He’s been clear that the agreement is a framework and a starting point – but it’s not the end because there are naturally gaps that we need to fill.”
German carmakers have also lobbied the EU to push back the post-Brexit rules which threaten to hike tariffs and halt production.
VDA, the German car industry’s representative group, said “we must urgently make adjustments” to the trade deal – saying looming changes meant “a significant competitive disadvantage for the European car industry in relation to its Asian competitors”.
Mr Sunak, while in Japan for the G7 summit, said the UK was in talks with the EU about how to address concerns relating to auto manufacturing “more generally”.
“It’s something that car manufacturers across Europe, not just in the UK, have raised as a concern. And as a result of that, we are engaged in a dialogue with the EU about how we might address those concerns when it comes to auto manufacturing more generally.”
Nissan has also issued warnings about the costs of manufacturing electric cars at its Sunderland plant because of high energy costs and inflation.
On concerns about UK battery-making capacity, Mr Sunak said: “Nissan have invested a billion pounds in battery manufacturing capability in the North East. I’ll be talking to the Nissan CEO and other Japanese business leaders later about investment into the UK.”
Ms Badenoch’s comments in the Commons came as Labour’s shadow business secretary Jonathan Reynolds warned that the “automotive sector has issued warning cry after warning cry that government policy risks shipping jobs overseas”.
