Concerns Rise Over UK’s Exclusion from EU’s “Made in Europe” Initiative

The head of Mercedes-Benz has issued a strong warning that excluding the UK from the European Union’s new industrial legislation, known as the “Made in Europe” act, would be a conscious decision by EU leaders that could severely impact the automotive sector across the continent. Ola Källenius, speaking as president of the European Automobile Manufacturers’ Association (ACEA), emphasized that such a choice would undermine the competitiveness of both the UK and EU car industries.

The Industrial Accelerator Act and Its Implications

As discussions surrounding the Industrial Accelerator Act (IAA) intensify, there is growing concern that the UK’s automotive sector may be sidelined from crucial contracts within the EU. This “Made in Europe” legislation is designed to bolster local industries and counteract competition from outside the EU, mainly targeting China’s significant trade surplus with the bloc, which currently stands at around £1 billion daily. However, it could inadvertently create barriers that also affect the UK, Norway, Turkey, and Switzerland.

Källenius remarked at an annual industry briefing in Brussels, “It does not make any sense; we would harm our industry in both the UK and the EU. That would be a deliberate choice to diminish the competitiveness of your own industry.” He added, “We are discussing how to enhance industrial capabilities in Europe and develop local supply chains, which is the essence of the IAA.”

Political Push for Inclusion

Proponents such as Andy Burnham are advocating vigorously for the UK to be incorporated into the Made in Europe framework, although resistance, especially from France, complicates matters. The UK Prime Minister plans to address this issue at the upcoming UK-EU summit on November 20, expressing hope that it isn’t too late, even with an anticipated political agreement by December.

In a recent turn of events, the EU urged the UK to align with its trade stance by imposing tariffs on imported Chinese vehicles, a measure set to take effect in 2024. The EU believes that such alignment would strengthen the UK’s case for inclusion in the Made in Europe legislation.

However, UK Business Secretary Jonathan Reynolds stated during a visit to India that this alignment is not currently in the works.

Tariff Concerns and Industry Anxiety

The ACEA is also advocating for a suspension of the proposed 10% tariffs on UK electric vehicles (EVs) exported to the EU, as well as EU EVs heading to the UK. Jonathan O’Riordan, ACEA’s international trade director, expressed concern, saying, “We are getting very anxious about it. The deadline is in less than three months. All our manufacturers are worried.”

This tariff structure originates from the post-Brexit Trade and Cooperation Agreement (TCA), designed to incentivize faster battery production—an essential component accounting for about 45% of a new car’s cost. Both the EU and the UK are facing challenges in producing sufficient electric batteries that can compete with those from China. Starting next year, cars exported between the two regions will incur a 10% tariff unless they meet certain production criteria.

Originally scheduled for implementation in 2024, the tariff was postponed for three years to give the industry time to adjust. However, the automotive sector is now urgently requesting an additional two to three-year extension to alleviate further pressures.

Growing Tensions Over China Trade

Meanwhile, concerns within the EU have escalated regarding China’s trade surplus with the bloc. Recently, an agreement was reached between Beijing and Brussels to reduce hybrid electric car sales by half over the next four years as part of efforts to address this imbalance. A senior EU official noted that reliance on increasing EU exports is no longer viable, stating, “No amount of champagne exports is going to revitalize the relationship with China.”

Conclusion

The future of the UK automotive industry hangs in the balance as negotiations over the Made in Europe legislation continue. The exclusion of the UK not only threatens its automotive sector but could also weaken the competitiveness of the broader European industry. As discussions progress, industry leaders call for collaboration to protect and bolster local markets in an increasingly globalized environment.