Another Brexit benefit

[tommy toes]

https://www.bbc.co.uk/news/business-65612295

We won't have to bother producing electric cars or batteries then.

Hurrah for Brexit.
Good job we took back control.

[Glyn_Wigley]

If only someone had known what the post-Brexit origin rules were going to be and told everybody before the referendum without getting told they knew nothing about it...!

[Donnywolf]

.... AND that everything the Remainers said was to be regarded as "Project FEAR"

[tommy toes]

Heard a bloke on the radio saying if this is not sorted out by eliminating the 10% tariff, then car production in this country will cease with the loss of 800,000 jobs.
Brexit eh?

[selby]

  They will be made in China anyway, and we want to concentrate on Hydrogen.

[tommy toes]

  They will be made in China anyway, and we want to concentrate on Hydrogen.

Oh that's alright then. Sod the car industry, those losing their jobs can go and pick fruit.
Jesus wept.

[ravenrover]

And don't forget, don't make a cheese sandwich if you can't afford the cheese says SS dream lover

[Glyn_Wigley]

  They will be made in China anyway, and we want to concentrate on Hydrogen.

Hydrogen cars will be subject to the exact same origin rules, so they're f**ked too.

But hey, people knew what they were voting for.

[selby]

  .Glyn. I will bet you anything you want that within ten years the biggest origin of cars sold in Europe will not  be made in Europe, but in China or India.
  In fact like Volvo there is a good chance that most European car manufactures will be owned by Chinese and Indian companies anyway.
  Tata anyone?

[Glyn_Wigley]

  .Glyn. I will bet you anything you want that within ten years the biggest origin of cars sold in Europe will not  be made in Europe, but in China or India.
  In fact like Volvo there is a good chance that most European car manufactures will be owned by Chinese and Indian companies anyway.
  Tata anyone?

Origin has NOTHING to do with the nationality of who owns the company, but the origin of the goods themselves.

And if cars don't comply with the preference origin rules, no matter where they're built, they'll have the full 10% tariff on them. So any cars built in China or India and sold in the EU will have 10% Duty slapped on them just the same as any built in the UK that don't comply with the origin rules enough to be deemed to be of UK origin.

[albie]

Selby is right about China and India, massive growth in their lower cost EV models.

The European and US companies are restricted by offering two entirely different technology products, and have over-focussed on the high end, a big mistake if you are playing the long game.

He is completely wrong on Hydrogen.
No-one is serious about hydrogen for cars, battery performs much better on all measures.

Hydrogen might have a role in long distance trucks, but even that is on a long time horizon.
Hydrogen is more promising for use in the steel and cement industries, (maybe shipping), but not as a fuel for personal transport or heating.

[albie]

Yes Glyn, but the price differential between products from those countries and the developed economies means that any tariff barrier will be absorbed.

The UK getting into a tariff war with China would have serious implications for the UK economy.

[scawsby steve]

Those of you worried about the effects of Brexit needn't be. U turn Keith pledged that Labour won't be applying to re-join the EU when he becomes Prime Minister. That means they almost certainly WILL be.

Job's a good 'un.

[big fat yorkshire pudding]

By the sounds of it vauxhalls plans involve reducing significantly the British parts in the cars hence the lack of compatibility.  Addressing that should be key.

[Glyn_Wigley]

Yes Glyn, but the price differential between products from those countries and the developed economies means that any tariff barrier will be absorbed.

The UK getting into a tariff war with China would have serious implications for the UK economy.

The UK can't get into a Tariff War with China about this, this is about goods imported into the EU having 10% Duty on them or not. Neither the UK or China can do anything about what they levy by competing against each other. The EU doesn't have a preference agreement with China, the UK does.

[Glyn_Wigley]

By the sounds of it vauxhalls plans involve reducing significantly the British parts in the cars hence the lack of compatibility.  Addressing that should be key.

And that is what the rules of origin are all about. For UK cars to be deemed to be of UK origin, and therefore not attract any Duty when exported to the EU, they can only have a maximum of 45% of the value of the ex-works price be parts of non-UK origin.

[albie]

Glyn,

Are we talking about components fully manufactured abroad and simply shipped to destination for assembly, or raw materials brought in to make key components here (like for batteries), or both?

[Glyn_Wigley]

Glyn,

Are we talking about components fully manufactured abroad and simply shipped to destination for assembly, or raw materials brought in to make key components here (like for batteries), or both?

If it's of non-UK origin, whether imported raw materials or manufactured components, you cannot have the value of them be more than 45% of the ex-works value of the finished vehicle for that vehicle to be deemed as being of UK origin.

There is an exception, though. If the non-UK elements are of origin of an EU member state, they can be excluded from the 45% rule because in effect when you export the vehicle to the EU, the EU is re-importing goods of their own origin.

[Branton Red]

It appears to me that this specific part of the EU-UK trade deal was negotiated in good faith and with the best of mutual intentions i.e. retaining/encouraging the motor industry supply chain in the EU/UK.

It would appear that the negotiators were overly optimistic in the time it would take to get battery factories up and running in the Europe.

This is fixable through renegotiation which again would be to the UK/EU's mutual benefit given manufacturers on both sides of the Channel are lobbying for the same.

Regardless of Brexit, this specific part of the trade deal or the way the EU operates the building of battery plants is crucial to the future of the UK/EU motor industry.

It is not the fault of Brexit, the trade deal or the EU that many European countries' Governments (inc the UK) have been slow in supporting getting these plants off the ground.

In fact the existence of this deal and the deadlines included would appear to provide an additional incentive for European nations to get themselves into gear on the key issue of getting these battery plants up and running quickly.

[Glyn_Wigley]

It appears to me that this specific part of the EU-UK trade deal was negotiated in good faith and with the best of mutual intentions i.e. retaining/encouraging the motor industry supply chain in the EU/UK.

It would appear that the negotiators were overly optimistic in the time it would take to get battery factories up and running in the Europe.

This is fixable through renegotiation which again would be to the UK/EU's mutual benefit given manufacturers on both sides of the Channel are lobbying for the same.

Regardless of Brexit, this specific part of the trade deal or the way the EU operates the building of battery plants is crucial to the future of the UK/EU motor industry.

It is not the fault of Brexit, the trade deal or the EU that many European countries' Governments (inc the UK) have been slow in supporting getting these plants off the ground.

In fact the existence of this deal and the deadlines included would appear to provide an additional incentive for European nations to get themselves into gear on the key issue of getting these battery plants up and running quickly.

It wasn't negotiated at all. And was never likely to be.

It's exactly the same arrangement the UK had with non-EU countries when were inside the EU. Now we're outside the EU, we're in exactly the same position as any other non-EU who has a Preference Agreement with the EU.

I still cannot understand why anyone thought - or indeed still thinks - we were going to treated any differently to any other non-EU country by the EU once we left.

And because of that, yes it IS because of Brexit that we are in this position. To deny it is to ignore reality yet again.

[Branton Red]

This deal is mutual and works both ways. It applies to UK exports to the EU; and EU exports to the UK. It encourages both EU and UK motor manufacturers to source goods from within either the UK/EU.

VDA, the German car industry lobby Group, stated "we must urgently make adjustments to the agreement because Europe's battery industry has not developed fast enough"

i.e. there are 2 faults (1) European Governments (inc UK) not supporting the development of building battery plants quickly enough and (2) the timing of deadlines within the deal being too ambitious - which therefore require changing.

[Glyn_Wigley]

We're still doing well to even have the agreement as it exists. Most non-EU countries don't have it, including the USA and Japan. We could very easily have been in the same position.

And it is still caused by Brexit. If the UK was still in the Single Market the problem wouldn't exist.

[Branton Red]

The key problem is that Europe (again inc UK) is behind the rest of the world in developing battery plants for electric cars.

This is absolutely key to the continuing success of the UK and European motor industries.

That would be the case with or without the UK being in the Single Market.

[albie]

Battery manufacturers will locate where their business costs are the lowest, taking into account any additional costs in accessing markets.

I am struggling to see why these companies would choose to base in the UK, in preference to the EU, to serve a relatively small UK market.

Another consideration is Biden's Green Deal, the Inflation Reduction Act.
Central to this is developing USA based industries supplying the sector without dependence upon foreign imports.

The UK is a small economy in comparison to the USA, China and the EU.
An additional premium of 10% to export based manufacturers is a big disincentive to multi national interests investing in the UK sector.

[Branton Red]

The 10% only applies if the point of origin rules are not met - which they almost certainly will be once battery plants are up and running in either the UK or EU (the rules allow either).

The UK builds around 900,000 vehicles a year. So there is plenty of incentive for a battery manufacturer to have a base here.

Also batteries are heavy bits of kit and costly to transport. The closer the battery plants are to the vehicle manufacturing plants the better from a low business cost basis.

[Glyn_Wigley]

It depends what the rule of origin for the batteries is. They'll have a different commodity code to a completed vehicle so the rules of origin coild well be completely different.

[BillyStubbsTears]

The number of cars built in the UK was 775k in 2022. Down from nearly 1.7m in 2016.

I forget. What happened in 2016?

[albie]

All the major players in the battery industry are Asian.
A UK battery sector would need to play alongside the established providers, who have first mover advantage.

To compete with them on volume and price the UK would need an investor at scale, and a contractual commitment by the EV sector to use a UK battery.
With the car industry in decline, what is the likely volume of EV from UK factories which would not draw down the 10% tariff?

Decent article in the Torygraph summarising the difficulties;
https://www.telegraph.co.uk/business/2023/05/18/brexit-stitch-up-battery-failures-left-britain-car-industry/

[belton rover]

The number of cars built in the UK was 775k in 2022. Down from nearly 1.7m in 2016.

I forget. What happened in 2016?

Germany’s car production was down by more than 2 million in the same period.

[Glyn_Wigley]

But starting at a production of nearly 6 million cars in 2016.