Locking the UK out of the EU’s flagship industrial “Made in Europe” legislation would amount to a “deliberate choice” by EU leaders to “hurt” the car industry across the bloc, the head of Mercedes-Benz has said.
Speaking in his capacity as president of the European Automobile Manufacturers’ Association (ACEA), Ola Källenius said such a move would “weaken the industry on both sides”.
He was speaking just weeks before political leaders hope to reach agreement on the Industrial Accelerator Act (IAA), potentially keeping the UK car industry out of key contracts in the EU.
The act, known as the Made in Europe law, aims to protect local industry by countering competition from outside the EU.
It is mainly aimed at China, which is now enjoying a £1bn a day trade surplus with the EU, but has caused potential problems for the EU’s close allies including the UK, Norway, Turkey and Switzerland.
“It does not make any sense … We would hurt our industry in the UK and the EU. That would be a deliberate choice to worsen the competitiveness of your own [EU] industry,” Källenius said at an annual briefing in Brussels on the state of the car industry.
“We are talking about how we industrialise more in Europe, how we build local supply chains, that is what the IAA is all about,” he added.
Andy Burnham has been lobbying hard to get the UK included in the Made in Europe legislation but is hitting resistance, particularly from France.
The prime minister intends to raise it at the UK-EU summit on 20 November and is hoping it is not too late, even though EU leaders are aiming for political agreement on the current text by December.
Last month, the EU urged the UK to follow the bloc and impose tariffs on imported Chinese vehicles, which it introduced in 2024.
It argued this would help the UK’s case to be included in Made in Europe as it would align more closely with the EU on key trading sectors.
But the UK business secretary, Jonathan Reynolds, said on a trip to India that this was not on the cards at the moment.
The ACEA is also lobbying hard for an urgent suspension of plans to introduce 10% tariffs on UK electric vehicles (EVs) imported to the EU, and EU EVs exported to the UK.
“We are getting very anxious about it. The deadline is in less than three months’ time. We have our feet to the fire in terms of the tariffs. All our manufacturers are worried,” said Jonathan O’Riordan, the ACEA’s international trade director.
The tariff schedule is written into the post-Brexit Trade and Cooperation Agreement (TCA) as a way of incentivising the industry on both sides of the Channel to speed up the production of batteries, which can represent about 45% of the cost of a new car.
Under the TCA, car exports on both sides are tariff-free if they are mainly made in Europe, but with the EU and the UK unable to produce sufficient electric batteries to compete with China, cars exported to each others’ market would be subject to a 10% tariff from next year.
The tariff was originally due to come into force in 2024 but was suspended for three years to give the car industry more time.
The car industry says it needs a further two- or three-year suspension urgently.
Meanwhile, concern has intensified in the EU in the last three months over China’s trade surplus with the bloc, with a threat of trade barriers leading to an agreement on Friday between Beijing and Brussels to reduce sales of hybrid electric cars by half over four years.
One official said the time to rebalance trade by increasing EU exports was gone. “No amount of champagne [exports] is going to revitalise the relationship [with China],” a senior EU official told a separate trade policy briefing in Brussels.
