Friday, June 21, 2024
Cars

Brexit has wrecked Britain’s car industry, but so have the Tories | Phillip Inman


There is no hope for Britain’s car industry … or at least no hope of maintaining the scale and productive capacity that this bedrock of the UK manufacturing sector could boast before the Covid-19 pandemic.

It’s downhill from here.

Brexit is an issue – whatever the business secretary, Kemi Badenoch, says – because being inside the single market and sitting at the top table in discussions about the industry was always going to give the UK more heft when the inevitable Europe-wide carve-up over electric car factory locations happened.

Government policy – or, more accurately, the almost complete lack of it – is probably a much bigger factor when the survival of the entire sector is at stake, as it clearly has been since the Brexit referendum.

And the car industry itself is a problem, especially the dominant players in the UK, which have too often preferred to play chicken over subsidies with a government that lacks a plan and is incapable of making more than incremental, piecemeal decisions.

Things have come to a head after a row with Stellantis, the world’s fourth largest carmaker, which was created when the US-Italian combo Fiat Chrysler merged in 2021 with the PSA group, better known as the owner of Peugeot and Citroen. The group, which also makes Vauxhall vehicles, employs more than 5,000 people in the UK, including 1,000 at its electric van factory in Ellesmere Port, Cheshire, and 1,200 at its Luton plant.

The company has warned that a commitment to make electric vehicles in Britain is in jeopardy unless the government renegotiates its Brexit deal with the EU to maintain existing trade rules until 2027. Jaguar Land Rover (JLR) has said much the same. So has Ford.

Like a billionaire shopping at Harrods, every car company wants lots of free stuff before they commit to expensive investments. Nissan secured an undisclosed government bung when it recommitted to north-east England before the UK left the EU at the end of 2019. JLR has since secured financial government support, as has Stellantis.

At the heart of the dispute, say the car firms, is the trade and cooperation agreement (TCA) between London and Brussels. It was signed in 2020 and includes “rules of origin” that require 40% of an electric vehicle’s parts by value to originate in the UK or EU in order for it to qualify for trade without tariffs. Most batteries come from China, so it’s a struggle to satisfy the rules. When the threshold rises to 45% next year and 55% in 2027 it will be impossible, carmakers say.

Brussels officials could reasonably blame the car companies and individual governments for a lack of readiness, or at least those that have so far failed to invest.

As an early adopter of electric vehicles, France’s Renault is not making any waves about the new EU rules. The country’s president, Emmanuel Macron, is an enthusiastic supporter and last week welcomed the Taiwanese battery maker ProLogium to Dunkirk, where it will build a large factory, bringing to four the number of gigafactories planned for a stretch of northern France being called “battery valley”.

The billions of euros on offer dwarf the puny sums seen in the UK. Stellantis is believed to have received about £30m to support its stay in Cheshire. The company secured €7bn from the Italian government in subsidies.

It shows that while Badenoch is wrong to say that car firms’ struggle to source batteries “isn’t to do with Brexit”, she would be right if her answer put more stress on the lack of an industrial strategy and meagre amounts of cash on offer.

Ministers also made the mistake of backing lame horses in the race to secure battery production facilities. The ill-fated company Britishvolt was on course to build a gigafactory factory in the north-east worth £3bn with a slug of government money – until it collapsed owing £120m.

It’s not an exaggeration to say that UK manufacturing’s house is on fire, even if the superstructure is burning slowly.

It looks like JLR – now being offered subsidies – and Nissan could end up being the only mass carmakers still operating in the UK five years from now. Toyota’s Burnaston plant near Derby makes hybrid cars and the boss says an assessment will be made at the end of the year about its future. Battery supplies are crucial, he says. Honda has already closed its Swindon plant and Ford and Stellantis may soon up sticks and quit as well.

When the value of an electric car battery can be 50% of the whole car’s worth, the decision about where batteries are produced and whether they fit your vehicle is crucial to future production.

It should be remembered that British factories built only 775,014 cars during 2022, the lowest annual figure since 1956. Production fell 9.8% from 2021, and declined 41% from 2019. The government is to blame for torching the industry far more than Brexit, but quitting the EU has played a part.



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