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Brussels tariffs are endangering net zero, carmakers warn

Electric cars in factory production being painted - Anadolu Agency/Anadolu
Electric cars in factory production being painted - Anadolu Agency/Anadolu

European car makers are demanding a delay to the introduction of post-Brexit tariffs on electric vehicles amid fears that the plans threaten the switch to net zero.

The European Automobile Manufacturers’ Association (Acea), which represents the likes of Mercedes and BMW, joined Jaguar Land Rover and Ford in warning that a crackdown on imported batteries was happening too fast for the industry to prepare.

In the UK, the Business secretary Kemi Badenoch is leading a push for Brussels to reconsider the tariffs, which will be introduced in January next year.

The rules will require components equal to at least 45pc of the value of an electric vehicle to be made in either the UK or European Union. Cars which fail to achieve this threshold will be hit with a 10pc tax if shipped to the EU from Britain, or vice versa.

Industry leaders fear the new rules are being introduced too fast because Britain and the bloc are both still heavily dependent on imported batteries from China. Stellantis, the owner of Vauxhall, has said that the proposals could force it to end production in the UK.

A spokesman for Jaguar said: “The proposed timelines for the Battery Rules of Origin... are unrealistic and counterproductive. We echo the call for the UK and EU to quickly agree a better implementation to avoid destabilising the industry's transition to clean mobility.”

Much of the value of an electric vehicle is in the battery, made in so-called gigafactories.

The EU and UK both face a challenge in that few gigafactories exist outside China, which also controls much of the world’s refining capacity for the raw materials needed to make batteries, such as lithium and graphite.

The looming rules are partly driven by fear in Europe that the UK could become a dumping ground for cheap Chinese-controlled minerals which would then enter the bloc. But they also present a looming problem for EU-based car makers seeking to export vehicles to Britain.

Acea said: “The establishment of a fully integrated battery supply chain in Europe is simply not taking off quickly enough to keep in line with more restrictive rules.”

The US carmaker Ford is calling for changes to be delayed until 2027. Germany's powerful automotive lobby group, the VDA, said that urgent adjustments are needed because the current rules will leave European carmakers at a disadvantage compared to Asian rivals in the UK.

The SMMT, Britain's auto trade body, said: “The current manufacturing capability in the EU and the UK does not allow our sector to meet upcoming origin requirements for batteries and battery parts.”

A Whitehall source told The Telegraph that the issue had been raised at both ministerial and official level in recent discussions with the European Commission.

Kemi Badenoch, the Business Secretary, told Valdis Dombrovskis, the EU's trade commissioner, that the proposals are also a problem for EU carmakers.

Britain was said to be keen on ensuring that the 2024 date does not become a cliff edge in its talks with Brussels.

Stellantis has called for the deal to be renegotiated to allow more time, it said in a submission to Parliament’s business committee. The company warned that it might be forced to close its factory in Ellesmere Port, Cheshire, if no compromise was reached.

Ms Badenoch is understood to be keen on reopening negotiations, but the terms of the  trade deal are overseen by the Foreign Office.

Britain only has one gigafactory, which supplies Nissan in Sunderland. JLR's owner Tata is deciding whether to build a facility of its own in Britain or Spain. Britain's only other widely known gigafactory developer, Britishvolt, ran out of cash earlier this year and no longer plans to make batteries in the near future.

Car makers are battling high energy prices in the UK, as well as concerns over access to other parts as well as batteries. They need more suppliers to be UK-based in order to meet the looming tariff rules.

Ashwani Gupta, Nissan's chief operating officer, told journalists in February that the car company must have access to a secure supply of parts in the UK in order for the market to remain attractive.

Only two of the world’s top 100 automotive suppliers are British, according to research by Berylls Strategy Advisors.

Government negotiators do not know where Tata will build its gigafactory, although the Chancellor Jeremy Hunt appears to be optimistic, telling an audience to “watch this space” when asked about the plans on Wednesday.

He added: “Everyone is trying to develop the supply of... batteries, so we need to have that supply here in the UK. The closer it’s located to the factories that are making the rest of the car, the better.”

A UK Government spokesman said: “Shocks to global supply chains have had significant impacts on both UK and EU manufacturers. The Business and Trade Secretary has raised this with the EU and is determined to find a joint UK-EU solution, which ensures the UK remains one of the best locations in the world for automotive manufacturing.”

EU officials have insisted the bloc is not prepared to consider changing the rules.