EU deal secures Nissan's long-term UK business as carmakers grapple with origin rules

Fri 22 Jan 2021
Posted by: William Barns-Graham
Trade News

nissan

Japanese carmaker Nissan has said that the long-term security of its Sunderland plant is secure as a result of the UK-EU trade deal. 

The company told the BBC that manufacturing at the plant, which employs 6,000 and supports 70,000 supply chain jobs, will continue as the company moves battery production for its electric ‘Leaf’ model from Japan to Wearside.

New models

Nissan is even considering building new models at the site, which is currently running at half capacity, according to the FT.

Observers suggest that the Nissan X-Trail SUV and the electric Ariya could both be built in the north east, although Nissan CEO Ashwani Gupta said it was too early to confirm this.

He said the trade deal would give Nissan a boost over other brands in the UK market as they face non-tariff barriers which will increase their prices.

“We have got the competitiveness as a home maker,” he told the FT. “The good news is it [the deal] is positive. Moving forward, we want to see it as an opportunity.”

Brexit is ‘peanuts’

In the run up to the end of the transition period, Gupta told the Japan Times that preparing for new trade rules with the EU was “Peanuts” compared to other challenges the company faced.

“For a global manufacturer … to have additional documentation to fill a form at the border is nothing. People prepared for it, we have updated our software, we have updated our processes. It’s OK,” he said.

Leaf model

The Times reports that Nissan hopes the new longer-range battery that it will manufacture in the UK will help boost sales. The 62kwh battery gives a range of 239 miles compared with 168 for the 40kwh version.

The UK is to ban sales of petrol and diesel vehicles from 2030 and Nissan’s electric Leaf model could benefit from the switch to electric and hybrid transmission.

Rules of Origin

Manufacturing the batteries in the UK allows the company to comply with EU Rules of Origin, whereby 55% of the car’s value needs to be created locally to allow it to benefit from zero tariffs. About 70% of Sunderland’s output is sold into the EU.

However, Autocar reports a “Brexit time bomb” for the car industry in the shape of a requirement to increase the proportion of UK and EU sourced parts ahead of 2027, when the entire battery must come from the UK or EU to avoid a 10% tariff.

Car executives, such as former Aston Martin CEO Andy Palmer, have called on the UK government to support the development of battery ‘gigafactories’ to safeguard the future of the UK auto industry.

Grace period

Rules of Origin were a key focus for UK negotiators in last year’s trade talks, who were keen to avoid disrupting UK industries with complex supply chains, such as car manufacturing.

Although the requirement for Rules of Origin was introduced on 1 January, manufacturers have been given a year’s grace period for completing certification for parts sourced outside the UK.