Will Brexit deny competition for the UK automotive sector?

Will the Brexit deal ever reach a position where both the EU and companies interacting with it are happy with the outcomes? 

Since the day that Brexit was initiated, there have been controversial views over whether it was the right choice from an international trade perspective. Following this, companies are seeing legislation changes that could make it more difficult to carry out sustainable business. 

The owner of Vauxhall, Peugeot, Citroen, and Fiat, has its concerns around the cost of exporting vehicles made in the UK to EU countries. According to Stellantis, UK-manufactured vehicles could face 10% tariffs due to new regulation on material and component sourcing. 

As a result, the automotive giant is calling out to UK ministers to discuss and propose better arrangements with the EU to maintain the current export regulations until 2027, which it hopes will be enough time to establish plans to cover the costs or renegotiate component sourcing. 

The UK government is adamant that the country will compete in electric vehicle (EV) business, and Stellantis explained in 2021 that its Ellesmere Port and Luton Plants were safe. However, the trajectory of the business in the UK could change as new hurdles are imposed without proper measures in place. 

Without addressing the latest export tariffs, the UK will no longer be able to compete with car makers in Asia—Japan and South Korea in particular—with the effects on the UK economy unknown. 

From 2024, 55% of the value of any EV produced in the UK should come locally, meaning components sourced from within its borders. The expectation will rise to 65% in 2027. 

What do registrations mean for the UK automotive business?

While we’re unsure how this will affect OEMs operating in the country, there are some factors to consider, including the recent collapse of the UK’s first large-scale gigafactory. Experiencing setbacks and failure to meet targets, the Britishvolt project is delayed while the acquisition from Recharge Industries is waiting in the wings. 

With the target set to double locally-sourced battery content from 30% to 60%, the UK must consider more means of sourcing materials for and developing batteries. 

The UK’s readiness to localise battery sourcing comes from the development of major manufacturing facilities, which is merely one step in the industry’s success. Further components, such as body parts and electrical hardware, will also be required if the UK is to meet its procurement targets. 

According to a report by the European Automobile Manufacturers’ Association, in 2018, 80% of the UK’s car production was exported with 54% going to EU member states. This was recognised at the time of the referendum when companies were uncertain of the outcomes.

Since then the UK has continued to expand its efforts to localise vehicle component sourcing. From 2011 to 2017, the UK saw a massive increase of localised vehicle content from 36% to 44%. This growth is to be expected time and time again to reduce the tariffs imposed as a result of Brexit.