Brexit tariffs could close UK car factories

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One of the world’s biggest carmakers has warned it may be forced to close its UK factories if the government can’t renegotiate part of the Brexit deal with the EU.

The UK’s new car production has been trending downward in recent years. In 2022, 775,000 new cars were made in the UK, down from around 1.5 million in 2018, according to industry trade body SMMT. Unfortunately, tariffs could contribute even further.

Stellantis, which owns various well-known car brands including Vauxhall, Peugeot, Citroen and Fiat, is due to make electric cars in the UK, but it now says that is under threat due to the terms of the UK’s departure from the EU. 

It warned it could face tariffs of 10% on exports to the EU due to rules on where parts are sourced from. These would commence from January 2024, when 55% of an electric car’s components by value must come from the UK or EU to avoid tariffs. 

From next year, 45% of the value of an electric car should originate in the UK or EU to qualify for trade without tariffs. This will rise to 65% in 2027. 

“If the cost of electric vehicle manufacturing in the UK becomes uncompetitive and unsustainable, operations will close,” Stellantis said, in what is the first time a major car producer has openly called on the government to revisit its Brexit deal. 

Stellantis called on ministers to come to an agreement with the EU to keep rules as they are until at least 2027.  

Business and trade minister Kemi Badenoch held a meeting with Stellantis executives in May in a bid to better understand the issue and how it could be addressed.  

According to BBC News, the meeting between Badenoch and Stellantis was constructive, and it is also believed the EU is receptive to the issue as many manufacturers in the UK and EU are facing difficulties sourcing batteries.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.

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