Stellantis, one of the largest global automobile manufacturers that owns renowned brands like Vauxhall, Peugeot, Citroen, and Fiat, has urged the government to reevaluate a portion of the Brexit agreement to avoid potential losses in the British car industry.

The company had previously made a commitment to produce electric vehicles in the UK; however, it now states that this commitment is jeopardized.

Stellantis cites challenges in complying with post-Brexit trade regulations, specifically regarding the sourcing of parts. As a result, it asserts that it is no longer able to meet these trade rules under the current arrangement.

The government is “determined” that the UK will remain competitive in car manufacturing, a spokesperson said.

“If the cost of electric vehicle manufacturing in the UK becomes uncompetitive and unsustainable, operations will close, ” Stellantis said.

This marks the first instance where a car manufacturer has publicly appealed to the government to reexamine the terms of the Brexit trade agreement.

The company has called for the government to reach an agreement with the European Union (EU) in order to maintain the current rules until 2027. Additionally, it has requested a review of the arrangements for manufacturing parts in Serbia and Morocco.

Only two years ago, the fourth-largest car manufacturer in the world expressed confidence in the future of its Ellesmere Port and Luton plants. However, Stellantis has now approached the UK government, citing concerns over the “threat to our export business and the sustainability of our UK manufacturing operations” and urging a renegotiation of certain aspects of the Brexit deal.

In its submission to a parliamentary inquiry on electric car production, the company emphasized that its investments in the UK were made with the intention of adhering to the stringent terms of the post-Brexit free trade agreement. These regulations stipulate that starting next year, 45% of the electric car’s value should originate from either the UK or EU in order to qualify for tariff-free trade. This threshold is expected to increase to 65% in the future.

Stellantis said it was “now unable to meet these rules of origin” after the surge in raw materials costs during the pandemic and energy crisis.

Stellantis said it was “now unable to meet these rules of origin” after the surge in raw materials costs during the pandemic and energy crisis.

If the government cannot get an agreement to keep the current rules until 2027, from next year “trade between the UK and EU would be subject to 10% tariffs”, it said.

This would make domestic production and exports uncompetitive in comparison to Japan and South Korea, it said.

“To reinforce the sustainability of our manufacturing plants in the UK, the UK must consider its trading arrangements with Europe,” Stellantis said.

According to a government spokesperson, Business and Trade Secretary Kemi Badenoch has raised the concerns expressed by Stellantis with the European Union (EU). Today, Ms. Badenoch is scheduled to meet with Stellantis executives and is determined to maintain the UK as a leading destination for automotive manufacturing, particularly during the transition to electric vehicles.

The government has established a fund to develop the electric vehicle supply chain and plans to take decisive action in the coming months to secure future investments in zero-emission vehicle manufacturing.

The agreement regarding electric cars and batteries was one of the final matters settled in the Brexit negotiations between Boris Johnson and Ursula von der Leyen in 2020.

Stellantis’ document warns that if electric vehicle costs remain uncompetitive, manufacturers may cease investing and relocate their manufacturing operations outside of the UK. It highlights Ford, BMW’s electric Mini, and Honda’s investment in the US after closing its Swindon site.

The primary issue lies in the lack of UK battery plants and a domestic supply chain that should be established now but is being overshadowed by developments in other countries. Subsidies from the US, China, and the EU in this market have raised concerns about the UK missing out on significant investment opportunities in the electrification of cars.

Recently, French President Emmanuel Macron hosted Elon Musk of Tesla, who hinted at potential investment in a gigafactory (battery manufacturing facility) in France. Additionally, the Spanish government is actively pursuing the owners of Jaguar Land Rover, the UK’s largest manufacturer, to host a gigafactory that was previously assumed to be established in the UK.

Andy Palmer, former COO at Nissan and chairman of battery startups Inobat and Ionetic, expressed the urgency of establishing battery manufacturing in the UK, stating that time is running out.

“It’s basically impossible to meet those [EU] local content rules unless you’re sourcing your battery from a plant in the UK or in the EU,” he told Radio 4’s Today programme.

He added that the cost of failure was clear: “It’s 800,000 jobs [lost] in the UK, which is basically those jobs associated with the car industry.”

David Bailey, professor of business economics at the Birmingham Business School, agreed, saying: “If we don’t make batteries at scale in the UK, we won’t have a mass car industry.”

He added that although the government under Boris Johnson wanted a “gigafactory” built in the UK, “essentially there’s no industrial policy to back that up”.

The Brexit trade agreement included a phased implementation of stringent rules regarding the origin of electric vehicle parts.

The initial stage of these rules will take effect next year, and there is speculation that the EU might consider renegotiating them if their own manufacturers encounter difficulties meeting the origin requirements.

However, these requirements are firmly embedded in the UK-EU treaty, making any renegotiation challenging.

The rules are set to become even stricter in 2027, leading industry insiders to believe that UK exporters will face significant challenges in exporting cars tariff-free without domestic battery production.