The real reason car manufacturers are still talking about Brexit

It’s been almost seven years since the UK voted to leave the European Union, so why are we still talking about it?

Top car manufacturers are pushing back against post-Brexit rules, including trade tariffs on the sale of electric vehicles if their parts do not comply with the new ‘rule of origin’. 

Whether or not you were Team Leave, or Team Remain, it was always clear that the UK extracting itself from the EU would not be a clean-cut affair.

Trade with our international neighbours has – and continues to be – a sticking point. For the British automotive industry, the trade tariff on electric vehicle parts imported from outside the UK may prove to be something of a stumbling block on the path to going ‘green’ in time for 2030.

At present, post-Brexit rules require 40% of an electric car’s parts to be sourced in the UK or EU if it’s to be sold on the other side of the Channel. Referred to as the ‘rule of origin’, failure to meet this requirement attracts a 10% trade tariff on every sale. 

This requirement is expected to rise to 45% next year and again to 55% in 2027, putting further pressure on the British automotive industry’s transition to clean mobility. 

Why is this putting pressure on manufacturers?

The production of electric vehicles is still massively underdeveloped, compared to petrol and diesel counterparts.

The materials required to make the batteries – and the factories themselves – are mostly located outside of the UK, with a heavy reliance on Asian countries to fulfil this demand at present.

This reliance means British car manufacturers are unlikely to escape the 10% tariff now, or moving forward, unless more EV batteries are produced in the UK or the EU rethinks its tariff rules.

With the 2030 deadline curbing the sale of new petrol and diesel cars looming, British car manufacturers are pushing for the UK government to renegotiate with the EU, rather than risk losing momentum on the transition to clean mobility.

Stellantis, who own the Vauxhall, Peugeot and Citroen brands, has already called for a renegotiation – joined by Jaguar Land Rover and Ford. This marks the first time since the UK left the EU that carmakers have explicitly asked for a review of the agreement.

What does this mean for a sustainable motor industry? 

It would be easy to view this stumbling block as a setback on the path to a greener future.

However, the fact that manufacturers are asking for a renegotiation of post-Brexit rules indicates that car makers are taking the responsibility to transition to clean mobility seriously.

They are requesting that the threshold increase to 45% to be deferred until 2027, in order to give European and UK factories a chance to catch up with those in Asia. In essence, carmakers don’t want to be penalised for selling more EV’s in the UK and Europe.

The fact is that if manufacturers are continually hit with the 10% tariff as the threshold rises in the lead up to 2030, they will struggle to complete with cheaper rival models produced in East Asia.

Stellantis, which employs more than 5,000 people in the UK, has already voiced concerns about the longevity of its presence in the UK if the situation does not change.

It is likely that continued failure to address the current rules will result in the closure of some UK based automotive factories, as manufacturers move production abroad to stay competitive.

Positive signs

It’s clear that the UK government is hearing the automotive industries concerns.

While post-Brexit rules have yet to be renegotiated, action is being taken to try and alleviate some of the pressure caused by long-term reliance on Asia for EV parts.

In May 2023, the UK government offered Tata, the Indian-based owner of Jaguar Land Rover, £500m in subsidies to build an electric vehicle battery plant in Somerset. This will protect – and potentially create – thousands of jobs, while creating another UK-based supply of EV batteries.

Ford has also invested £380m in growing its e-motor capacity at its plant in Merseyside, which should also help reduce reliance on the import of parts and subsequent tariffs.

A viable long-term solution to decarbonising Britain’s roads needs to consider how post-Brexit rules are likely to impact the industry.

So, it's a good thing we're still talking about Brexit? 

We think so!

It’s clear that the UK government needs to implement a clear, long-term business strategy for decarbonising the industry in a post-Brexit world to keep up with the efforts of the USA and EU.

Brexit might feel like a somewhat tired subject seven years on, but by meaningfully engaging with the legislation and new rules imposed as part of the deal, our motor industry can continue its efforts to transition away from the sale of new petrol and diesel cars in time for 2030.