Key facts
- Excluding the UK from the EU's "Made in Europe" legislation would hurt the car industry in both the EU and the UK, according to Mercedes-Benz CEO Ola Källenius.
- Källenius, who also heads the European Automobile Manufacturers’ Association (ACEA), called such a move a "deliberate choice" that would "weaken the industry on both sides."
- The "Made in Europe" law aims to protect local industry from external competition, primarily from China.
- The UK is seeking inclusion in the legislation, with lobbying efforts underway, but faces resistance, particularly from France.
- EU leaders aim for political agreement on the current text of the Industrial Accelerator Act (IAA) by December.
- The ACEA is lobbying for a suspension of planned 10% tariffs on UK and EU electric vehicles, due to take effect in less than three months.
Locking the UK out of the EU's "Made in Europe" industrial legislation would be a "deliberate choice" by EU leaders to "hurt" the car industry across the bloc, according to Ola Källenius, head of Mercedes-Benz and president of the European Automobile Manufacturers’ Association (ACEA).
Källenius stated that such a move would "weaken the industry on both sides" and reduce the competitiveness of the EU's own industry. The legislation, also known as the Industrial Accelerator Act (IAA), aims to protect local industry by countering competition from outside the EU, particularly from China, which has a significant trade surplus with the bloc. The act could potentially exclude the UK, Norway, Turkey, and Switzerland from key EU contracts.
Källenius made these remarks at an annual briefing in Brussels, emphasizing that the IAA is focused on industrializing more in Europe and building local supply chains. Andy Burnham has been actively lobbying for the UK's inclusion, but faces resistance, notably from France. The UK prime minister plans to raise the issue at the UK-EU summit on November 20, with EU leaders aiming for political agreement on the current text by December.
Last month, the EU encouraged the UK to impose tariffs on imported Chinese vehicles, similar to the EU's 2024 measures, suggesting this could strengthen the UK's case for inclusion in the "Made in Europe" law. However, UK Business Secretary Jonathan Reynolds stated that such tariffs are not currently being considered. The ACEA is also urgently seeking a suspension of planned 10% tariffs on UK electric vehicles (EVs) imported to the EU and EU EVs exported to the UK, which are set to take effect in less than three months.
These tariffs are part of the post-Brexit Trade and Cooperation Agreement (TCA) and are intended to incentivize increased production of electric batteries on both sides of the Channel, as batteries constitute about 45% of a new car's cost. While exports are tariff-free if mainly made in Europe, the inability of the EU and UK to produce sufficient batteries to compete with China means cars traded between them would face a 10% tariff from next year. This tariff was initially scheduled for 2024 but was suspended for three years to allow the industry more time. The car industry is now calling for a further two- to three-year suspension.
Meanwhile, concerns over China's trade surplus with the EU have intensified, leading to an agreement on Friday between Beijing and Brussels to reduce sales of hybrid electric cars by half over four years. A senior EU official noted that increasing EU exports is unlikely to significantly rebalance the relationship with China.