One of the world’s largest car manufacturing companies has called on the UK government to renegotiate its post-Brexit deal with the EU or risk losing out in the automotive sector.

Stellantis – the parent company of Vauxhall, Fiat, Peugeot and other well-known car brands – told a parliamentary inquiry that rules of origin contained in the EU-UK Trade and Cooperation Agreement (TCA) make it difficult for UK manufacturers to source parts from abroad while retaining tariff-free trade.

Concerns

The TCA governs much of the post-Brexit trading relationship between the UK and EU.

Under the rules of origin, at least 40% of the value of any electric car should originate from the EU or UK in order to avoid a requirement to pay import duties, although this number will increase to 45% from 1 January 2024.

From 1 January 2027 onwards, this is set to increase to 55%, with an additional requirement that the battery must be originating for hybrid vehicles.

Currently up to 70% of electric vehicle battery components can come from outside the UK or EU before tariffs apply, but this is also set to drop to 40% from 1 January 2024 onwards, with further changes planned.

Concerns

Stating it had “concerns” on the impacts of rules of origin requirements for the supply of batteries and other items, Stellantis called the deal, as it currently stands, a “threat” to its export business and manufacturing, according to City AM.

It also warned that stricter rules of origin could create “significant challenges to the bilateral trade of electric vehicles and batteries”.

It called on the government to seek an improved deal with the EU in order to overcome these problems, as reported by Sky News.

Labour leader Keir Starmer has called for the TCA to be “improved.”

Ongoing work

Anna Doherty, senior customs and trade specialist at the Institute of Export & International Trade, said:

“It’s important to remember that the changes to the rules of origin are being implemented over two phases. Industry needs to be looking at both, as the 2027 rules are lowering the non-originating content allowance even further.

“Although the TCA has a provision that the rules of origin for batteries applicable from 2027 can be reviewed, this request cannot be made until May 2025 at the earliest.”

As reported previously by the IOE&IT Daily Update, both the UK and EU are working together to stop some of these tariffs applying ahead of a 1 January 2024 deadline.

A government spokesperson told the BBC that it was “is determined to ensure the UK remains one of the best locations in the world for automotive manufacturing, especially as we transition to electric vehicles.”

They added that business and trade secretary Kemi Badenoch has raised this issue with the EU and will meet with Stellantis later today.