Mercedes chief hits out at EU tariffs set to penalise carmakers

The head of Mercedes-Benz has called for a delay in post-Brexit rules that would add stiffer tariffs on shipments to and from the UK and Europe from next year, saying the car supply chain in Europe was not yet self-sufficient enough to meet tougher sourcing requirements.

The German carmaker’s chief executive Ola Källenius said January 2024 was “too soon” to bring in tariff rules set out in a post-Brexit trade agreement, rules intended to encourage more local sourcing of vehicle components.

Under these so-called rules of origin, electric cars exported between the UK and the EU will need to have 45 per cent of their parts sourced within the two regions to avoid 10 per cent tariffs. 

Källenius joined other European carmakers lobbying for a delay, including Stellantis boss Carlos Tavares who on Tuesday called for the phase-in date to be pushed back to 2027, warning the current timeframe was a “lose lose” situation for both the EU and the UK.

“As the production capacity of Europe’s battery industry is not yet sufficient, to demand stringent rules of origin poses a major challenge for the competitiveness of our industry,” Källenius said at the inauguration of a cell manufacturing plant in northern France, the first of four planned car battery plants planned in the region. 

The factory — which will supply Mercedes’ electric cars and is part of its battery partnership with TotalEnergies and Stellantis — was a step in the right direction towards building a standalone European car manufacturing industry, at a time when the region was trying to wean itself off dominant Chinese and Asian batteries, Källenius added. 

“But all in all, the first of January 2024 is too soon. We need more time for this transition and we would therefore appreciate political support, together with our British partners, in this matter,” Källenius said. 

The looming deadline and backlash from carmakers has highlighted the scale of Europe’s challenge to catch up with Chinese and South Korean battery producers, the main suppliers globally to electric vehicle manufacturers. 

Mercedes’ joint venture with Stellantis and Total, called Automotive Cells Co or ACC, is set to get under way this year with an initial 13 gigawatt/hour capacity at a plant in Douvrin, in northern France. Two more factories are expected to launch in Germany and Italy by 2030, with the aim eventually of supplying 2mn batteries a year. 

These are among a handful of similar projects carmakers are trying to progress across Europe, many of which are supported by state subsidies. French ministers on Tuesday said government support would help make local production competitive compared to Asian or US-made alternatives.

They also vaunted the lower carbon footprint of the European plants, which would add to the products’ appeal for car manufacturers trying to comply with increasingly strict emissions rules.

But battery supplies and production for now are constrained and dependent on Asia, just as carmakers are already racing to try and outdo each other with new electric models.

Tavares said a consensus was emerging that 2027 would be a reasonable phase-in date for the new tariff rules.

These could deal a further blow to Britain’s struggling car industry, not least because of Stellantis, the group behind Vauxhall, also threatening to close its UK factory of Ellesmere Port unless the tariff issue is renegotiated.

“It’s a technical adjustment that should not create too much trouble,” Tavares said on Tuesday, asked about delaying the phase-in to 2027. “Without [a deal] this looming deadline will create a lose-lose situation [for Britain and Europe]. As both will lose from it, it would be in both their interests to change the date.”

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