UK carmakers face a three-year scramble to source electric car batteries domestically or from the EU to keep away from tariffs on exports following the Brexit free commerce deal, in accordance to trade analysts.
The Christmas Eve deal implies that all UK-EU commerce in automobiles and elements will proceed to be freed from tariffs or quotas after the the Brexit transition interval ended on Friday, so long as they comprise sufficient content material from both UK or EU factories. The deal got here as a significant reduction to the embattled car industry.
Batteries will at first be allowed to comprise up to 70% of supplies from international locations outdoors the EU or the UK. However, from 1 January 2024 that requirement will tighten to 50%. This will imply that sourcing battery supplies from throughout the UK or EU would be the solely reasonable choice for UK carmakers to keep away from EU tariffs from 2024 onwards, in accordance to Alessandro Marongiu, a commerce analyst on the foyer group the Society of Motor Manufacturers and Traders (SMMT).
The guidelines imply it is going to be very important for UK carmakers to safe a battery provide from the the EU or the UK, mentioned Mike Hawes, the SMMT’s chief government. The deal makes it “imperative that the UK secures at pace investment in battery gigafactories and electrified supply chains”, he mentioned.
Ian Henry, whose AutoAnalysis consultancy works with various main carmakers, mentioned one key concern in preserving the UK car trade was creating a complete provide chain, together with manufacturing essential and chemically sophisticated elements such because the cathodes essential to lithium-ion batteries.
“By the mid-2020s, the UK has got to be doing a lot more than just assembling bits from a kit,” mentioned Henry. “Several core processes in battery manufacturing will have to take place here in order for the UK to have a viable electric vehicle industry.”
The overwhelming majority of batteries utilized in UK and EU electric automobiles are sourced from east Asian corporations akin to China’s CATL, Korea’s LG Chem or Japan’s Panasonic. However, European carmakers and governments are pouring billions of euros into new battery crops, with at the very least 10 credible efforts below manner from corporations together with Sweden’s Northvolt and the French oil main Total, in accordance to knowledge firm LMC Automotive.
The UK is lagging behind, with no absolutely funded plans to start battery manufacturing in Britain, regardless of the promise of presidency funding and trade assist for British “gigafactories” able to large-scale battery manufacturing. The government-backed Faraday Institution this yr mentioned a failure to construct a UK battery provide chain might price more than 100,000 jobs by 2040.
The Brexit deal was welcomed by the startup Britishvolt, which is the one firm with public plans to construct a gigafactory within the UK. Britishvolt final month bought rights to a site in Blyth, Northumberland, the place it plans to construct a manufacturing facility, topic to fundraising.
The Brexit deal’s provisions match completely with Britishvolt’s formidable plans to begin battery manufacturing at scale by the top of 2023. It hopes to begin constructing the plant in the summertime. A spokesman mentioned the deal would permit it to serve each the UK’s home automotive trade and carmakers in Europe.