How Will the US-UK Deal on EV Supply Chains Affect Carmakers and Battery Makers?
On Thursday, Rishi Sunak and Joe Biden announced the “Atlantic Declaration”, stating that the United States and the United Kingdom will work towards an agreement to allow critical minerals like lithium, mined or processed in the UK, to be counted towards “local content” requirements for vehicles and batteries made in the USA. However, a group of industry insiders believes that UK carmakers and battery makers will miss out on this new agreement. Negotiations between the UK and the US will aim to enable UK minerals to receive tax credits when present in American-built vehicles. Although the US is holding similar talks with Europe, Japan, and South Korea, UK negotiators hope to achieve a more ambitious definition. This definition would enable electric cars built in the UK that contain minerals that qualify for the tax credits to receive some tax credits, even those exported to the US. However, automakers, such as Jaguar Land Rover, and battery makers, such as China’s Envision, which makes batteries in Sunderland, will not be eligible for the benefits if their batteries and vehicles are not assembled in North America to qualify for the tax credits.
The Atlantic Declaration will make a significant impact on trade between the US and the UK. While the UK is capable of producing nearly every component required to build an electric vehicle, according to Mike Hawes, head of the Society of Motor Manufacturers and Traders, the country currently lacks significant refining capacity for critical minerals.
The deal includes a “data bridge” that will enable smaller companies to cut the red tape they face while moving data across the Atlantic. In addition, the agreement includes plans to seek to end Russia’s dominance in nuclear fuel supply chains and to develop advanced nuclear technologies, including small modular reactors.
The Defense Industry: Pros and Cons
Defense industry executives welcome the announcement, although they say more details are needed to understand how it would work in practice and which companies would benefit. BAE Systems and Rolls-Royce have US subsidiaries that already allow them to work on sensitive US defense programs. Still, it is unclear which UK defense manufacturers will benefit from the deal.
The Importance of Strategic Cooperation in the Nuclear Sector
The nuclear sector is of strategic importance to the US-UK deal. There have long been robust US-UK ties in the nuclear sector, and strategic cooperation is now more critical than ever given the need to deliver secure clean energy on both sides of the Atlantic. Carol Tansley of X-energy, a private US developer of advanced nuclear power, stated that the deal “creates a very positive context for the discussions that are likely to take place later in the year.” The agreement includes developing advanced nuclear technologies, including small modular reactors, and seeking to end Russia’s dominance in nuclear fuel supply chains.
How will the Atlantic Declaration Affect Tax Credits?
According to the Inflation Reduction Act, consumers who purchase an EV can claim $7,500 in tax credits. However, the vehicle must be assembled in North America, and enough parts must be sourced from the region. Negotiations between the US and the UK will focus on allowing UK minerals to receive tax credits when present in American-built vehicles, only if the vehicles and batteries are assembled in North America to qualify for the tax credits. The United States is currently holding similar talks with Europe, Japan, and South Korea to strengthen EV supply chains that do not depend on China. An industry figure believes that the Atlantic Declaration is a positive step towards discussions that will likely impact the EV market worldwide.
Summary
Rishi Sunak and Joe Biden announced the “Atlantic Declaration” stating that the United States and the United Kingdom will work towards an agreement that will allow critical minerals mined or processed in the UK, such as lithium, to be counted towards “local content” requirements for vehicles and batteries made in the USA. While this will make a significant impact on trade between the US and the UK, UK carmakers and battery makers will initially miss out on the benefits of this new agreement. The Atlantic Declaration will also include a “data bridge” for smaller companies to cut red tape while moving data across the Atlantic. Furthermore, defense industry executives welcome the announcement, although they say more details are needed to understand how it would work in practice and which companies would benefit. Additionally, the nuclear sector is of strategic importance in the US-UK deal. The agreement includes developing advanced nuclear technologies, including small modular reactors, and seeking to end Russia’s dominance in nuclear fuel supply chains. Finally, negotiations between the US and the UK will focus on allowing UK minerals to receive tax credits when present in American-built vehicles, but only if the vehicles and batteries are assembled in North America to qualify for tax credits.
Expanding Beyond the Atlantic Declaration: Achieving Carbon Neutrality by 2050
The Atlantic Declaration is a crucial step towards the EV industry’s development in both the US and the UK. However, achieving carbon neutrality worldwide by 2050 requires more significant efforts from all parties involved. As the climate changes, governments and companies globally must prioritize carbon neutrality to safeguard the planet.
The EV industry’s development requires a significant shift to sustainability. Governments worldwide must invest in zero-emission transportation while transitioning from fossil fuels. For example, Norway aims to have all new cars sold to be zero-emission by 2025, and the UK has set an ambitious goal of ending the sale of new petrol and diesel cars and vans by 2030.
Currently, only four percent of the world’s vehicle production is electric. However, experts predict that electric vehicles will dominate the market in the coming decades, from 7.2 percent of new vehicles registered in Europe last year to a predicted 22 percent in 2025.
To achieve carbon neutrality, governments must incentivize companies to display environmental leadership, implementing policies and regulations that require companies to adopt best practices in carbon emissions reduction. Additionally, companies must find ways to reduce their emissions, optimize logistics to save energy, and switch to renewable energy sources.
In conclusion, the Atlantic Declaration is a significant step towards EV development and the transition to carbon neutrality by 2050. Still, it should only be the start of more extensive efforts by governments and companies worldwide. Achieving carbon neutrality will require a significant shift towards sustainability and a coordinated effort globally.
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Carmakers and battery makers in the UK will miss out on a new deal by Rishi Sunak and Joe Biden that their countries will work together on EV supply chains, according to trade experts and official documents.
As part of “Atlantic Declaration” announced in Washington on Thursday, the United States and the United Kingdom will work towards an agreement that allows critical minerals, such as lithium, that are mined or processed in the United Kingdom to be counted towards the “local content” requirements for vehicles at battery made in the USA.
Under the Inflation Reduction Act, consumers who buy an EV can claim $7,500 in tax credits if the vehicle is assembled in North America and enough parts are sourced from the region.
The negotiations between the UK and the US will focus on allowing UK minerals to receive tax credits when present in American-built vehicles.
The United States is holding similar talks with Europe, Japan and South Korea on trade deals, as part of its efforts to strengthen EV supply chains that do not depend on China.
But UK negotiators are hoping to push for a more ambitious definition that allows electric cars built in the UK and exported to the US to receive some tax credits, on the grounds that they contain minerals that qualify for the credits.
However, under the current proposed UK-US deals outlined on Thursday, automakers such as Jaguar Land Rover and battery makers such as China’s Envision, which makes batteries in Sunderland, will not be eligible for the benefits, according to several industry insiders who they looked at the plans.
That’s because the batteries and vehicles still need to be assembled in North America to qualify for the tax credits, the people said.
A government spokesman said: “The Atlantic Declaration is set to offer a number of benefits to British car manufacturers. In addition to deepening our collaboration in emerging technologies that are essential for the development of our automotive sector, the Critical Minerals Agreement will help grow our national critical minerals sector, which in turn will strengthen the EV industry of the United Kingdom”.
Mike Hawes, head of the Society of Motor Manufacturers and Traders, which represents the UK’s motor industry, said: ‘Britain can only benefit from such an agreement if we take the opportunity to ramp up our production of critical minerals. , build our battery capacity and supply [materials for] US car manufacturing.
While the UK is capable of producing “nearly every component theoretically needed to build an electric vehicle,” the country “currently lacks significant refining capacity for critical minerals,” he added.
The statement, released on Friday, said the two countries “will start negotiations on a targeted critical minerals agreement covering the five most important critical minerals for electric vehicles: cobalt, graphite, lithium, manganese and nickel.”
If these are “mined or manufactured in the UK,” they “will count towards the sourcing requirements for clean vehicles eligible for the Clean Vehicle Tax Credit of Section 30D of the Inflation Reduction Act,” it adds.
Jeff Townsend, founder of the Critical Minerals Association, said the deal “has the potential to revolutionize the UK’s critical minerals sector”. Creating alternative supply chains required closer global cooperation and the bilateral deal “will become an extremely important part of the solution,” he said.
The statement covers areas from technology and defense to future AI regulation. It is an attempt by the two countries to work more closely on important areas, stopping short of an official trade deal between the UK and the US.
The statement was welcomed by business leaders, but executives said more details were needed.
“We need both governments to turn words into deeds and deliver on the commitments in the declaration,” said Julian David, chief executive of trade association TechUK.
The deal includes a “data bridge” for smaller companies to cut the red tape they face when moving data across the Atlantic. Tina McKenzie, policy chair of the Federation of Small Businesses, said this would be a “practical boost to digital and services exports.”
Defense industry executives also largely welcomed the announcement, but said more details were needed to understand how it would work in practice and which companies would benefit. BAE Systems and Rolls-Royce operate US subsidiaries which already allow them to work on sensitive US defense programs.
The agreement includes plans to seek to end Russia’s dominance in nuclear fuel supply chains and to develop advanced nuclear technologies, including small modular reactors.
An industry figure said it “creates a very positive context for the discussions that are likely to take place later in the year.”
Carol Tansley of X-energy, a private US developer of advanced nuclear power, said: “There have always been strong US-UK ties in the nuclear sector. Strategic cooperation is now more important than ever given the need to deliver secure clean energy on both sides of the Atlantic and the enormous economic opportunities that come with it.”
Additional reporting by Sylvia Pfeifer, Rachel Millard, Peter Foster and Harry Dempsey
https://www.ft.com/content/d609e040-7fe7-4285-9b21-4e71f730ec4a
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