Brexit deal may be too little, too late for UK auto industry

Nissan and Toyota Motor Corp. hybrids and EVs built in England are cut some slack in the Brexit trade deal, with the accord allowing a greater proportion of vehicle content to come from outside the UK or the EU. Still, the initial so-called rules of origin require 10 percentage points more local content than what the UK sought.

These are the rules of origin, according to the trade deal: 

  • Gasoline and diesel cars need to be made with at least 55 percent local content to avoid tariffs — five percentage points more than what automakers and the UK wanted.
  • EVs and hybrids will need 40 percent local content, 10 percentage points more than what the UK sought.
  • Until 2023, batteries can have as much as 70 percent overseas content, and EVs and hybrids can have as much as 60 percent foreign content.
  • From 2024 to 2026 — when European battery production is expected to be further along — batteries can have 50 percent overseas content, and EVs and hybrids 55 percent foreign content

It’s unclear whether Nissan’s all-electric Leaf hatchbacks built in Sunderland have enough local content to avoid levies. While Nissan welcomes the trade agreement, it will now “assess the detailed implications for our operations and products,” Azusa Momose, a company spokeswoman in Yokohama, said by email.

Toyota’s Corolla hybrid compact cars built in Burnaston as well as the non-electrified vehicles assembled at the site qualify for tariff-free export to the EU, said Sonomi Aikawa, a company spokeswoman in Tokyo. The company benefits from its engine plant in Wales, she said.

The automakers’ tariff requirements going forward may be affected by their plans to bring more of their battery supply chains to the region. Electric vehicles will be given another six years to bring their amount of foreign content below 45 percent, the threshold gasoline and diesel cars will be held to immediately.

“The timings underscore the urgent need for government to create the conditions that will attract large-scale battery manufacturing to the UK and transform our supply chains,” said Mike Hawes, CEO of the industry trade group SMMT. “Improving the competitiveness of the UK will be essential to help mitigate the additional costs and burdens brought about by our new trading relationship.”

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