The Mercedes-Benz CEO, Ola Källenius, has called for a delay in new post-Brexit trading rules, which are set to impose higher tariffs on shipments between the UK and Europe. The rules are intended to encourage local sourcing of vehicle components but Källenius claims they are unnecessary: the European automotive supply chain is not yet self-sufficient enough to meet the additional procurement requirements. Postponing the rules will provide more time for the transition, and the German automaker’s CEO has requested the deadline be extended from January 2024 to ensure a smooth transition.
Källenius’s call for a delay is supported by other European automakers including Carlos Tavares, the CEO of Stellantis, who is recommending the postponement date be moved to 2027. Tavares warns that the deadline is a “lose-it-loss” situation for both the UK and the EU. New tariffs could have a serious impact on the British auto industry, with Stellantis threatening to close its Ellesmere Port British factory unless the issue is renegotiated.
The potential tariffs are the result of new rules of origin regulations that state electric cars exported between the UK and the EU will need to have 45% of their parts sourced from the two regions to avoid the tariffs. These rules come as the European automotive supply chain, particularly the European battery industry, is still developing and reliant on Asia to supply and produce electric car parts. Catching up with Asia’s battery makers is vital for the European automotive industry to create an autonomous European auto industry free from Asian domination.
Mercedes has teamed up with Stellantis and TotalEnergies to form Automotive Cells Co (ACC), creating the first of four car battery plants in northern France. The factory will supply Mercedes’ electric cars, but more plants will open in Germany and Italy by 2030, aiming to supply two million batteries a year. Several similar projects such as these are supported by state subsidies from the French government to boost local production to help the European automotive industry become more competitive, as the sector adjusts to new, and increasingly stringent, emissions rules.
Summary:
German carmaker Mercedes-Benz is calling for a delay in new post-Brexit trading rules on shipments between the UK and Europe set to impose higher tariffs on vehicle components. Under the new rules of origin regulations, electric cars exported between the UK and the EU need to have 45% of their parts sourced from the two regions to avoid 10% tariffs. Mercedes’ CEO, Ola Källenius, warns that the European automotive supply chain is not yet self-sufficient enough to meet additional procurement requirements and requests that the deadline is extended from January 2024 to ensure a smooth transition. The deadline is already seeing automakers, including Stellantis’ CEO Carlos Tavares, lobby for a postponement date, recommending the deadline for the new fare rules be moved to 2027.
Additional Piece:
The European automotive market faces unprecedented challenges in its path towards emission-free vehicles. Although Europe is the largest auto producing region in the world in terms of market share, with 23 million units produced in 2019, it is undoubtedly behind Asia and the United States when it comes to investment in next-generation innovations. In light of the aforementioned regulatory requirements for vehicles’ substantial content requirements from the EU and the UK, the global automotive industry will need to radically restructure supply chains, and that will involve huge investments in newer battery technologies that rely on metal chemistries other than lithium-ion.
While waiting for next-generation innovations such as quantum batteries, solid-state batteries, or lithium-sulfur batteries, automakers need to collaborate on the “Big Bang moment” which the industry as a whole is experiencing. This will most likely be a transitional period affected by COVID-19-induced disruption. The European automotive industry needs to focus on short-term goals and initiatives to remain adaptable. These plans mean indigenous battery production around Europe will have to emerge as soon as possible, as it is the component that makes up the majority of electric vehicle (EV) costs. Thus, the industry needs to pivot along the supply chain to develop new business models where cars are designed and produced around the locally available materials.
Another significant challenge that the automotive industry faces is the need for common lithium-ion battery technology and platforms. With the growth of EVs, there is a real risk of incompatible technology platforms becoming the norm, leading to wasteful investment and inefficiency. Indeed, if the automotive industry were to develop multiple incompatible charging standards like the mobile industry did, it will lead to charging station over-expenditure, which has negative implications such as an increase in electric bills across regions, as the cost of constructing and operating these new charging stations will be passed on to consumers through higher electricity rates.
In conclusion, Europe could be the next breeding ground for globally dominant particles to reduce EV production costs and improve product performance. To achieve this, the use of science technologies such as machine learning and artificial intelligence can be seen as guiding elements, allowing Europe to produce more opportunities to invest in alternative battery chemistries. Simultaneously, the EU’s regional availability of cobalt, recycled lithium, and nickel will have to be harnessed in light of growing short-term interests to implement a more sustainable battery economy.
Relevant statistics:
– Europe’s battery industry’s worth could be worth over €250 billion ($298 billion) per year by 2025, accelerating Europe’s transition to electric vehicles and renewable energy.
– Europe produced 23 million cars in 2019, equating to 20% of worldwide manufacturing volume.
– Combined with digital services, electric vehicles will make up over two-thirds of investment in European auto industries.
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The Mercedes-Benz boss has called for a postponement of post-Brexit rules that would add tougher tariffs on shipments to and from the UK and Europe starting next year, saying the automotive supply chain in Europe was not yet self-sufficient enough to meet more stringent procurement requirements.
The German automaker’s chief executive, Ola Källenius, said January 2024 was “too early” to introduce tariff rules set out in a post-Brexit trade deal, rules intended to encourage more local sourcing of vehicle components.
Under these so-called rules of origin, electric cars exported between the UK and the EU will need to have 45% of their parts sourced from the two regions to avoid 10% tariffs.
Källenius joined others European automakers are lobbying for a postponementincluding Stellantis boss Carlos Tavares who on Tuesday called for the phase-in date to be pushed back to 2027, warning that the current time frame was a “lose-it-loss” situation for both the EU and the UK.
“Since the production capacity of the European battery industry is not yet sufficient, demanding strict rules of origin poses a major challenge for the competitiveness of our industry,” Källenius said at the inauguration of a cell manufacturing plant in northern France , the first of four planned car battery plants planned in the region.
The factory — which will supply Mercedes‘ electric cars and part of its battery partnership with TotalEnergies and Stellantis — it was a step in the right direction towards building an autonomous European auto industry, at a time when the region was trying to free itself from Chinese-dominant batteries and Asian, Källenius added.
“But all in all, January 1, 2024 is too early. We need more time for this transition and therefore would appreciate political support, together with our British partners, in this matter,” said Källenius.
The looming deadline and the backlash from automakers have highlighted the scale of Europe’s challenge to catch up with Chinese and South Korean battery makers, the main global suppliers to electric vehicle makers.
Mercedes’ joint venture with Stellantis and Total, called Automotive Cells Co or ACC, will start this year with an initial capacity of 13 gigawatt hours at a plant in Douvrin in northern France. Two more plants are expected to open in Germany and Italy by 2030, with the aim of supplying 2 million batteries per year.
These are among a handful of similar projects that automakers are trying to push ahead across Europe, many of which are supported by state subsidies. French ministers said on Tuesday that government support would help make local production competitive with Asian or US alternatives.
They also boasted the smaller carbon footprint of European plants, which would increase the attractiveness of the products for automakers looking to comply with increasingly stringent emissions rules.
But battery supplies and production are currently limited and dependent on Asia, even as automakers are already racing to try and outdo each other with new electric models.
Tavares said a consensus was emerging that 2027 would be a reasonable date for the new fare rules to be phased in.
These could deal a further blow to the struggling British car industry, not least due to Stellantis, the group behind Vauxhall, even threatening to close its Ellesmere Port British factory unless the tariff issue is renegotiated.
“It’s a technical adjustment that shouldn’t create too many problems,” Tavares said on Tuesday, calling for the phase-in to be delayed to 2027. “Without [a deal] this looming deadline will create a no-win situation [for Britain and Europe]. Since both would lose, it would be in their best interest to change the date.”
https://www.ft.com/content/161f26d3-1604-4855-92de-2029b58d096b
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