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Gloucestershire Business News

SMMT sounds alarm on UK-EU agreement

UK vehicle production has risen again – but it's yet another month when the trade body for the auto industry sounds a claxon on an approaching tariff migraine that could hike prices and put 2024 into a tailspin.

Statistically, September was more good news again: UK car manufacturing grew 39.8%, the strongest month of growth in 2023, with 88,230 units leaving British factories.

The rise in production was driven by a 32.2% exports uplift - with almost six in 10 models built going to the EU.

And even better news at home was reported with deliveries for the UK market also surging by a bumper 65.9%.

As ever, EVs are powering the good news: electrified vehicle output rose by 41.5% in total.

Yet if the UK is to remain competitive from the start of next year, urgent action is needed.

The SMMT said: "The volume of British cars exported to global markets has risen by 16.3% to 524,973 units since January, with electrified vehicles accounting for more than a third (37.5%) of outbound shipments, up from 26.4% a year ago.

"Given the increasing importance of EV trade with mainland Europe in particular - bilateral trade which has more than doubled in value in the last three years - the tariff-free trade set out in the UK-EU Trade Cooperation Agreement (TCA) must be maintained.

"This is under threat, however, from January 2024 when tougher rules of origin for batteries come into force. Given the value of batteries to the total cost of an EV, the rule changes threaten the competitiveness of both UK exports to the EU and EU imports to the UK market."

Failure to comply will result in a 10% tariff, the SMMT warns, which if fully passed on would raise the average cost of UK-built battery electric vehicles (BEVs) by £3,600 in Europe, while EU-made BEVs sold in the UK would see an average £3,400 price.

"A three-year delay to the implementation of these new requirements would, however, maintain competitiveness, supporting British and European manufacturers, and is readily achievable through the existing TCA framework with no need for formal renegotiation.

Mike Hawes, SMMT Chief Executive, added: "A particularly strong period of car making is good news for the UK, given the thousands of jobs and billions of pounds of investment that depend on the sector. With countries around the world shifting to zero-emission motoring, Britain is well placed to be a global EV manufacturing hub if the investment and trading conditions are right."

But he warned: "Given the increasing importance of electrified car production, the first and urgent step is for the UK and EU to agree to delay the tougher rules of origin requirements that are due imminently. This would give the necessary breathing space for automotive sectors on both sides of the Channel to scale up gigafactories and green supply chains, both of which are essential for a stable, long-term transition."

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