Vauxhall owner's tariff warnings highlight 'existential threat' to UK's EV future

The UK car industry is facing an “existential threat” due to new trade rules which could make British-built electric cars uncompetitive.

Vauxhall parent group Stellantis said that rules of origin legislation due to come into force in 2024 will impose tariffs of 10% on its UK-built EVs and could render the business unsustainable because it has to import batteries from elsewhere.

Professor David Bailey, professor of business economics at the Birmingham Business School, said the regulation posed an “existential threat” to the UK car industry and Andy Palmer, chairman of the battery start-ups Inobat and Ionetic, told Radio 4’s Today programme the country was "running out of time" to protect the 800,000 people employed across the sector.

The issue around trade tariffs is a major one - 80% of UK-built cars are exported overseas, so any additional costs could be disastrous. But it also highlights a broader problem with automotive manufacturing in the UK where competition from overseas and a perceived lack of government support is putting the industry at risk. 

The rapid development of electric vehicles brings with it the need for battery production on a massive scale and, as Stellantis has warned, for the UK to remain relevant it must be able to produce these batteries domestically.    

According to the government-funded Faraday Institute, there will be demand for five 20GWh battery plants in the UK by 2030 to supply units for cars, light commercial vehicles, HGVs, buses, micromobility and grid storage. Focused purely on automotive, the Society for Motor Manufacturers and Traders (SMMT) predicts a need for at least 60GWh of locally sourced batteries in the same period.

The government says it is committed to putting the UK at the forefront of EV technology and millions of pounds have been poured into battery research facilities such as UK Battery Industrialisation Centre but the reality is the country is lagging behind on vital production. 

There is currently only one functioning large-scale battery plant - Nissan’s 1.7GWh joint venture with Chinese firm Envision AESC in Sunderland, which builds batteries for the Leaf EV. The two firms have also begun work on a new facility nearby which should have a capacity of 12GWh by 2025 and could be ramped up to 25GWh by 2030.

The only other confirmed gigafactory plan - a proposed 38GWh operation in Blyth, Northumberland - collapsed in January when Britishvolt failed to secure the necessary investment. 

There are rumours that other sites, including locations in Coventry and Gravity smart campus in Somerset, could become home to the UK’s next gigafactory and the government has set up an £850m fund to help attract battery manufacturers but so far there are no firm links to any major manufacturers. 

Quentin Willson from EV campaign group, FairCharge, accused the government of acting too slowly in supporting the industry. He said: “We’ve been warning the government for two years how vital UK battery manufacturing capacity was because of Brexit rules of origin. They weren’t listening and now our entire car industry is at risk and the economic threat is catastrophic. This is a terrifying wake up call.” 

The UK’s lack of facilities is compounded by the levels of support being offered by other nations to encourage EV research and manufacturing. 

In its submission to the Commons’ business and trade committee, Stellantis noted that investment in battery plants was being “refocused” away from Europe due to support schemes in other regions. And the SMMT warned: “Britain’s ability to compete as an electric vehicle production leader is at risk unless government responds urgently to increasingly fierce international competition.”

In the US, the Inflation Reduction Act is a $369bn tool designed to invigorate the country’s green energy sector, including domestic production of EVs. Similar political efforts to stimulate local manufacturing have been launched in Canada, Japan and South Korea. And in France the government is offering subsidies to battery firms while new legislation is being considered that would stimulate domestic EV production at the expense of foreign imports. 

SMMT chief executive Mike Hawes said government action was needed to ensure the UK could compete in the face of this and did not “”squander” its existing strengths in EV production and research. 

He said: “With other parts of the world turbocharging their support for the zero emission vehicle transition, we need to step up to compete in this global race. Every part of the country has a stake in the switch and with fast, decisive action we can deliver for Britain the growth, jobs and green prosperity this country deserves.”

Among steps sought by SMMT are more competitive government incentives and action on energy costs to help stimulate private investment, along with reforming regulation to accelerate the building of new facilities and green energy generation. 

Lauren Pamma, director of transport programmes at the Green Finance Institute echoed calls for more investment in the UK battery supply chain, warning: “The UK cannot rely on business as usual and must invest in building a battery manufacturing capability if we are to compete as a global green business leader.”

She added: ”Without this support, we risk making Britain a far less attractive destination for the automotive and transport industry, and other sectors, that underpin our future economy. Only today, France has announced a package of green measures aimed at attracting investment into this supply chain, evidencing that other markets are continuing to grasp this opportunity and be more competitive in the sector.”

The government says it is committed to supporting the country’s automotive sector. Following the Stellantis warning, a Government spokesman said: “The Business and Trade Secretary is determined to ensure the UK remains one of the best locations in the world for automotive manufacturing, especially as we transition to electric vehicles.

“We are supporting the industry through the Automotive Transformation Fund and Advanced Propulsion Centre to develop a high-value end-to-end electrified automotive supply chain in the UK and support cutting-edge automotive technologies.

“In the coming months, the Government will build on these interventions with decisive action to ensure future investment in zero emission vehicle manufacturing."