The trade in electric vehicles in the UK and Europe

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Everyone wants a slice of the EV market. The auto industry is not only a major employer, it has also long symbolized a nation’s manufacturing prowess, from British Minis to Italian Ferraris. As the sector goes electric to meet climate change goals, the US, EU and China have been thrust into a race to build domestic EV production capacity. In the frenzy of subsidies and deals, electric automakers must decide how best to locate their complex supply chains.

Last week, global Stellantis automaker – which owns brands such as Vauxhall, Peugeot and Citroën – has warned UK lawmakers it may have to close one of its electric van factories. He fears that production will soon cease to be competitive. From 2024, as part of the post-Brexit trade deal, electric vehicles traded between the UK and the EU will have to have 45% of their shares sourced from both regions, or face 10% tariffs. British and European car manufacturers they claim they are not ready and fear being caught off guard in each other’s markets.

While so-called “rules of origin” regulations were clear when the Brexit deal was struck, automakers say Russia’s invasion of Ukraine and supply chain disruption have since altered the dynamics. of costs. Battery factories on both sides of the canal are also being set up later than expected when the rules are set. The rule itself serves as an important stick for both automakers and policy makers to invest in building a thriving domestic EV ecosystem. But if manufacturers believe this is not in place, the rules also risk denting the sector just as the US Inflation Reduction Act and China are drawing them in. It could also mean that electric vehicles traded between the UK and Europe are subject to tariffs, while petrol vehicles are not, keeping electric vehicles more expensive for longer. It would not be ideal for the green agenda.

At this stage, an extension of the 2024 deadline may make sense, as the companies are asking for. But automakers and governments must not use this as an excuse to delay action further. Indeed, the UK, which is further behind Europe in the EV space, needs to recognize that tariffs are only one element of the major effort needed to build a competitive EV system.

Batteries, also subject to local content regulations, include a significant share of the total cost of electric vehicles. But the UK has only a handful of gigabattery factories in its potential pipeline, compared to Europe’s 30. Attempts to court battery makers from Asia and nurture home-grown ones have failed: Britishvolt is bankrupt in January. Batteries also need critical minerals and refining processes in place. The US and the EU are investing money in this. The UK lags behind, throughout the supply chain, even before wider issues such as its high energy and logistics costs are considered.

Developing a thriving electric vehicle and battery sector requires long-term and joint thinking across sectors. As of today that is missing in the UK. The government avoids the idea of ​​an industrial strategy altogether, and recent political upheavals have not helped. He was left to hunt for self-employed business and put pressure on Brussels — an ineffective approach compared to the billions promised in the United States and Europe. For electric carmakers, Britain doesn’t look like a serious long-term gamble.

In the end, hoping that the European Commission delays regulations is not a strategy, either for British or European carmakers. The EU may have an incentive to defer tougher requirements, being ahead of the UK in this area. But, equally, could judge that with the damage probably higher in the UK than its own auto industry, given the UK’s greater reliance on car exports to the bloc, keeping it in place could help attract business across the Channel. Either way, the global battle for electric vehicles promises to be cutthroat, and those lacking a strategic approach will be left behind.