Tuesday, May 30, 2023

Car makers threaten to close UK factories

Stellantis, Ford and the Association of European Manufacturers (ACEA) have joined their voices in requesting an extension of the current state of post-Brexit trade rules between the United Kingdom and the European Union until 2027. This is known as the law of origin. This required that 45% of electric car parts come from either the United Kingdom or the European Union, so that they would not be subject to export tariffs, which would increase the cost of these transfers by 10%.

And the problem is in the battery. The UK has no battery factories and is not expected to do so in the short term. Only Nissan, one of the country’s largest manufacturers, has an assembly line with limited capacity to supply its own and is setting up another. In other words, the batteries for electrified cars produced there would have to come from Europe and then be exported back to the continent after being assembled into their respective vehicles. Bulkier and bulkier batteries will be punished by very heavy logistics costs for manufacturers.

For this reason, Stellantis has sent a letter specifically notifying it that its British plants are in clear danger of closure if the agreement is not renegotiated. The group, which has factories in Ellesmere Port and Luton and employs some 5,000 people in the country, announced two years ago that it would invest 115 million euros to build vans under its Vauxhall brand (Opel for the rest of the world). Will invest It now confirms that it will not be able to meet this given the existence of a network of suppliers capable of meeting its production needs.

Stellantis may close its Luton and Ellesmere Port plants

Ford has supported the Stellantis initiative, stating that “Ford requests that the current commercial requirements be extended to 2027 to allow time for the development of the battery supply chain in Europe and to meet demand for electric vehicles.” Go.” It also maintains that “tariffs will affect both UK and EU manufacturers, so it is vital that the parties come to the table to agree a solution.” Ford’s concern is understandable as it is investing 440 million euros in its Halewood factory to make electric motors. “Tightening trade rules at this point in time runs the risk of undermining the transition to electric vehicles with tariffs” which adds that the most affected manufacturers will be those that invested at the start of the transition and that the tariffs will be to a much lesser extent. Will be affected. combustion engine vehicle.

While ACEA, the manufacturers association, has highlighted the positions of both the companies, stating that “the electrical supply chain is not ready yet.”

Another fact that adds to the pressure is that the United Kingdom has banned the sale of thermal cars from 2030.

Unstable, unsupportable

The blow to the island nation’s car industry could be very severe. A 10% price hike for their vehicle imports from the EU would remove their products from potential competition. These imports have been hit over the years, with a sharp decline from 1,170,174 units in 2016 to 393,410 in 2021, according to ACEA data. If, moreover, production is definitely confined to the British market, many manufacturers will choose to move their production centers to the continental area, where they will have the necessary supplies. For example, Honda, which built one of its most emblematic models, the Civic, in Swindon has already closed and sold its factory in 2021 due in part to Brexit.

“If the cost of manufacturing electricity in the United Kingdom ceases to be competitive and becomes unsustainable, it will cease operations,” Stellantis general director Carlos Tavares said in statements collected by Reuters agency. Due to problems with the country’s government, Stellantis has halted investment in a giga-battery plant in Canada.

Around 800,000 workers are directly or indirectly employed in the automotive industry in the UK.

I work at AUTOMOCIONIUS in United Kingdom

And Spain?

The potential implications for Spanish industry are difficult to estimate. Although it is sad to talk about this topic, if Stellantis and Ford cease their activities in the United Kingdom and manufacturers move them to the mainland, it is possible that part of that production will end up in our country.

On the other hand, will these circumstances affect our trade balance positively? In principle, an increase in our exports to the British country would seem logical. In Spain, automobiles are the first product with a positive balance in our trade balance. According to ANFAC, vehicle exports are expected to increase to 34,219 million euros in 2021. In particular, with regard to the United Kingdom, the balance was also very positive, with 3,779 million euros (+11.3% compared to 2020) for our economy.

On the other hand, we are at a defining moment for various battery companies to announce their preferred locations for new plants in Europe. Tata Motors in Zaragoza, as well as Innobat in Valladolid, should make a decision soon. In both cases he speculated on the United Kingdom along with Spain as one of the possible locations. Investing in a place where battery production may outsell customers – either in the very short or medium term (2027 if regulation eventually stays that way of course) – is a business proposition to say the least controversial. Looks like a decision. However, Nissan decided to close its Barcelona facility a year early and gamble on the uncertainties in the UK.

UK exports may not be profitable SMMT

Manufacturer in uk

None of the other four major brands that have factories in Great Britain have production plants in Spain.

Nissan chose Sunderland before Brexit, as we alluded to above, where they manufacture hundreds of thousands of vehicle units a year. What’s more, they’ve invested relatively close in time, so it doesn’t look like they can leave their main western factory lightly. Are the Japanese counting on balancing their sales with the “mortgage” market that will remain in the British Isles if the new rates are eventually set? Of course, the savings in logistics cost compared to importing from the continent is an asset in your favor.

Toyota is one of the main manufacturers in the Anglo-Saxon country. It celebrated the 30th anniversary of its Barnstone factory last October, despite the fact that its continuity was in doubt with Brexit. The Japanese bet that the parties would reach a commercial agreement, and awarded the construction of the Corolla. They also have an engine factory in Wales (Deeside). Toyota employs around 3,000 people and mainly produces hybrid models, which also use batteries, although smaller ones.

Mini is one of the manufacturers producing in the British Isles Mini

Also the Mini continues to be produced in Oxford. However, a deal between BMW and Chinese Great Wall Motors will see production of the electric Mini begin in China from this year, as the German conglomerate announced last October.

And finally, Jaguar Land Rover will remain a major manufacturer apart from its British origins, although it is now owned by Indian conglomerate Tata Motors. The firm already has a factory on the continent, located in Slovakia, for several years.

Nation World News Desk
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