Stellantis threatens to leave UK and urges for more battery production sites

British car plants will close with the loss of thousands of jobs unless the Brexit deal is swiftly renegotiated, Stellantis warned. Ford also added its voice to the latest warning from the auto industry since Britain left the European Union.

Stellantis told lawmakers that under the current deal, it would face increased tariffs when exporting electric vans to Europe from next year when more rigid post-Brexit rules come into force. The group wants the government and the European Union to extend current rules on sourcing parts until 2027 instead of a planned change in 2024. A request echoed by the lobbying body for the European car trade (ACEA) and Ford.

Ford on Wednesday issued a separate statement calling for the extension to 2027. It said tariffs next year would risk slowing the transition to electric cars. “Tariffs will hit both UK- and EU-based manufacturers, so it is vital that the UK and EU come to the table to agree a solution,” the US carmaker said. Ford is converting the whole of its European production into BEVs as soon as possible.

An official British reaction says it is in talks with Brussels. “We hope to be able to come to a resolution with the EU on this,” Prime Minister Rishi Sunak’s spokesman told reporters on Wednesday last week.

Battery production is key

Car manufacturers say that as well as renegotiating tariffs, Britain needs to attract more battery production to secure the future of its car industry. However, British finance minister Jeremy Hunt hinted there would soon be a development. “Watch this space,” he said, “because we are very focused on ensuring that the UK gets EV and manufacturing capacity,” he said at an event on Wednesday.

The potentially existential problem facing Britain’s car industry is closely tied to the shift to EVs. Under the trade deal agreed when Britain left the bloc, 45% of the value of an EV being sold in the European Union must come from Britain or the EU from 2024 to avoid tariffs. In the coming years, the percentage will be raised to 55% in 2027 and even 70% for BEVs. The problem is that a battery pack can account for up to half a new EV’s cost.

Car industry in danger

Experts have warned since Britain left the EU at the end of 2020 that without several EV battery gigafactories, the country could lose a hefty chunk of its car industry. Currently, only Nissan has a small EV battery plant in Sunderland, with a second (more significant one on its way. Another Japanese manufacturer, Honda, closed its factory in Swindon, UK, and is announcing a hefty investment in EV production in the US.

Britishvolt, a start-up that received UK government support for an ambitious 3,8 billion pound (€4,4 billion) battery plant at a site in northern England, filed for administration in January after struggling to raise funds. The company was then bought by Australia’s Recharge Industries, which has yet to unveil plans for the site.

‘Cost of failure’

Andy Palmer, former Nissan and Aston Martin CEO and now chairman of European battery manufacturer InoBat, told BBC radio that urgent action was required. “The cost of failure is obvious. It’s 800 000 jobs in the UK, basically those associated with the car industry,” he said. “If you don’t have a battery capability in the UK, those car manufacturers will move to mainland Europe.”

Europe’s car trade body, ACEA, called on the European Commission to extend the phase-in period, saying the supply chain was not ready yet. Britain’s Society of Motor Manufacturers and Traders (SMMT) said in a submission to parliament that current manufacturing capability in the EU and Britain would not allow the sector to meet the requirements for batteries and battery parts.

Not in the UK

The warnings come as carmakers globally select sites to build new battery gigafactories. Last week, the CFO of Tata Motors, owner of Jaguar Land Rover (among others), said it had not decided on a location for a new battery plant, but advanced talks were underway. In February, it was reported that Tata was considering building an EV battery plant in Spain or Britain.

Stellantis announced a £100 million (€115 million) EV investment in its Ellesmere Port site in 2021. It said in the submission it had believed then that it could create enough parts in Britain or Europe to meet the post-Brexit rules but is now unable to do so.

‘Battery war’

Stellantis again underlines that the UK and Europe are losing the ‘battery war’. “Due to the high energy prices and the competitivity disturbances created by the Inflation Reduction Act in the US and similar initiatives in Canada, Japan, and South Korea, the investments in battery production in Europe and the UK have slowed down or simply been relocated outside Europe.”

According to Stellantis, the whole European car industry is in danger. The was also a recent report from the NGO Transport & Environment (T&E) that two-thirds of the planned European investments in battery production are momentarily at risk.