An Automaker Has a Stark Warning for the U.K. Car Industry
A distress signal has been raised from the beleaguered British car manufacturing industry. Stellantis, which owns brands such as Peugeot, Fiat and Vauxhall, told a parliamentary committee that car makers with factories in the UK will continue to do so amid the switch to electric vehicles and new export requirements following Brexit. He warned that the competition would struggle for the rest of the year.
The company has said it may close two UK factories that employ more than 5,000 people.
The company warned in a five-page document released this week that “if the cost of manufacturing electric vehicles becomes uncompetitive and unsustainable, the business will be shut down.”
The words echoed across the country on Wednesday, as Stellantis plans to play a key role in the electrification of the UK car industry. The company is refurbishing its factory in Ellesmere Harbor near Liverpool to produce small electric vans. Stellantis is already the UK’s largest producer of the popular Vauxhall commercial van. The vans used for e-commerce deliveries are manufactured at a factory in Luton, north London.
The comments further fueled fears that the country, once home to such iconic cars as the Jaguar XK-E and Morris Minor, is in a deep downward spiral for car manufacturing.
The number of cars produced in the UK plummeted to 775,000 last year from a peak of more than 1.7 million in 2016, when voters approved a Brexit referendum. However, production increased by 6% in the first quarter of 2023 compared to the same period last year as the parts problem eased.
But motor vehicle manufacturing remains an important industry in the UK, employing 182,000 people and accounting for 10% of UK manufactured goods exports, according to the industry group Automobile Manufacturers and Trade Association.
Britain’s departure from the European Union has raised doubts among automakers looking to invest in the country. Eight out of 10 cars made in the UK are exported, more than half of which are shipped to EU member states, requiring UK exporters to comply with trade rules in order to sell within the EU.
Analysts say the move to electric vehicles could be even more of a threat, as it forces global automakers to make big decisions about where to bet in the future.
“The real transition is to electric vehicles,” says Cardiff Business School automotive expert Peter Wells.
Britain has so far been unsuccessful in attracting the billions of dollars of investment needed to build the giant factories that make the batteries that make up most of the cost of electric cars.
The bankruptcy of a battery startup called British Volt in January further highlighted its shortcomings, and so far no replacement appears to have been found.
“I would argue that if things continue as they are, the UK will lose a lot of its car-making capacity within a decade,” said Andy Palmer, former chief operating officer of Nissan Motor Co.
Palmer said a post-Brexit Britain would have a tough time between the United States, which offers hefty tax incentives to encourage battery makers through anti-inflation laws, and the European Union, which will do everything in its power to compete with the United States. He said he was stuck. state.
“So we’re going to be competing with both the EU and the US,” Palmer said.
He said the UK government recognizes the importance of the automotive industry and is working to secure its future.
Chancellor of the Exchequer Jeremy Hunt told business people in London on Wednesday that “the focus is very much on making sure the UK builds electric cars”.
Of particular concern to Stellantis and other manufacturers are the so-called rules of origin, which are due to come into force next year. Under the rule, if a manufacturer wants to avoid paying a 10% tariff, at least 45% of the value of materials in cars exported to Europe must come from the UK or the European Union (EU), which is out of competition. It is a severe penalty in the intense automobile business.
Stellantis says it is unable to meet these standards due to issues such as rising raw material costs. The rule wants the UK government to negotiate a delay until 2027.
Concerns are not limited to the UK. Stellantis predicts that the UK and Europe will not have enough batteries to meet their government’s ambitious goal of moving to electric vehicles in the next few years.
Mr Wells said the situation was dampening the auto industry across Europe. “How can Europe insist on these local content rules and still serve the burgeoning electric car market?” he asked.
Eshe Nelson Contributed to the report.