German carmakers lobby to maintain tariff-free access to UK

German carmakers are lobbying the European Commission to delay post-Brexit rules that threaten to deliver a severe blow to Britain’s troubled car industry.

From next year, electric vehicles shipped between the UK and the EU will need to have 45 per cent of their parts sourced from within the two regions or face 10 per cent tariffs, under “rules of origin” terms set out in their post-Brexit trading agreement.

With many of the batteries still sourced from Asia, EVs are likely to fall foul of the new threshold and incur the tariff, which Vauxhall and Peugeot owner Stellantis warned on Tuesday might force it to shut its UK plant at Ellesmere Port.

VDA, the German car industry lobby group, said on Wednesday that “we must urgently make adjustments” to the agreement because the European battery industry had not developed fast enough and tariffs would place “a significant competitive disadvantage for the European car industry in relation to its Asian competitors in the so important UK market”.

The intervention is the belated fulfilment of Brexit advocates’ hope that German carmakers would step in to EU-UK negotiations to protect their own sales.

But it comes as the UK industry is going into the electric transition with significant post-Brexit headwinds. Homegrown battery manufacturer Britishvolt collapsed this year and Tata Motors, owner of Jaguar Land Rover, is demanding large amounts of government aid to place a significant battery plant in the UK rather than the EU.

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Jeremy Hunt, chancellor, said on Wednesday to “watch this space” when it came to new factories in Britain, a sign that ministers remained hopeful that a deal with Tata could be done.

Hunt said: “Everyone is trying to develop the supply of EV batteries, so we need to have that supply here in the UK. The closer it’s located to the factories that are making the rest of the car, the better.”

Officials briefed on the talks said “negotiations are continuing” with Tata, with one adding: “We have a generous package on the table. We are keen to land this major investment for the UK.”

Another official said Rishi Sunak, prime minister, and Grant Shapps, energy secretary, were personally leading talks with Tata. “It could still come to the UK — they’ve done a good job,” the official said.

In the UK parliament, Labour’s shadow business secretary Jonathan Reynolds said the government needed to “wake up, grab the steering wheel and get control of the situation before it is far, far too late”.

He added: “It is a statement of the blindingly obvious that the lack of battery-making capacity in the UK, combined with changes to the rules of origin, was a car crash waiting to happen.”

Downing Street said ministers were talking to Brussels about extending the 2024 tariff “cliff edge” for carmakers. “We have raised it with the European Commission. We recognise it’s a problem, not just for us but for them too. We need to find a solution.”

However, an EU official said Brussels was “not open to changes to the rules of origin”. “Stakeholders have been given the time to adapt, and they are advised to use the transition time provided,” the official added.

The EU is nonetheless facing a growing clamour from carmakers inside and outside the bloc. The European Automobile Manufacturers’ Association (Acea) said it was “calling on the European Commission to extend the phase-in period for the rules of origin for batteries beyond January 2024, as the establishment of a fully integrated battery supply chain in Europe is simply not taking off quickly enough to keep in line with more restrictive rules”.

Jaguar Land Rover called the timing “unrealistic and counterproductive”.

Ford, which makes electric cars in Germany and parts in the UK, called for a delay to 2027 and said, if implemented as planned, the requirement would add “pointless cost to customers wanting to go green”.

“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,” it added.

Although the UK imports more electric cars from Europe than it sells into the market, carmakers in Britain have far higher exposure to the EU than rivals in Germany or France have to the UK.