EVs must largely originate from UK to avoid customs tariffs
UK gigafactories can assist by shortening supply chain
UK government support needed for more gigafactories
The UK’s new rules of origin standards, following Brexit, have become a hot topic for the battery industry business in recent weeks, with increasing calls for homegrown electric vehicle (EV) production and investment in battery gigafactories to keep the UK auto sector alive.
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Under the EU-UK Trade and Cooperation Agreement, the two parties have agreed on nil or preferential customs duties, or tariffs, for goods that comply with the rules of origin, which means that most goods imported between the two regions have no customs duties as long as they largely originate from the respective countries.
This means that car manufacturers will need to prove that at least 40% of the value of the parts in a finished vehicle originate in the UK, or face paying export fees.
UK battery start-up Britishvolt Chief Technology Officer Allan Paterson told S&P Global Platts that, while the recent Brexit agreement had provided some clarity for the automotive and battery technology sectors, it also included increasingly challenging requirements on the rules of origin.
“For full battery electric vehicles (BEVs), where typically around 50% of the value of the vehicle is the battery pack, of which the cathode active material is the single largest individual price tag item, the supply chains and OEMs must take note,” Paterson said.
He added that the rules of origin offered an opportunity to Britishvolt to “consolidate the supply chain, produce cathode and anode active materials alongside gigafactory cell manufacturing facilities and to directly support those automotive OEM customers.”
Grant Thornton head of automotive Oliver Bridge said in an emailed statement that the rules of origin could drive additional tariff costs in parts of the automotive supply chain if components did not qualify for preferential status.
“UK businesses are likely to react to these potential tariffs by sourcing more UK origin for materials and components; companies like Britishvolt, that are investing in the UK, are expected to be well placed to supply UK origin batteries for UK- and EU-built electric vehicles,” Bridge said.
Cornish Lithium CEO Jeremy Wrathall told S&P Global Platts: “Personally, from my point of view, the rules of origin are the biggest motivator for more to be spent on battery plants here in the UK. If we can source lithium in the UK then it turns the whole argument about Europe on its head and makes the UK by far the most attractive place to build batteries.”
Cornish Lithium is one of two lithium exploration and development companies looking to extract lithium in the UK, the other being Northern Lithium.
Calls for UK government support
In January, former Aston Martin CEO Andy Palmer wrote an open letter to UK Prime Minister Boris Johnson calling for the government to step up its efforts to create homegrown EV battery production and establish a sector taskforce or face the possible consequences of losing its auto industry.
He urged the UK government to urgently establish a plan to build four gigafactories in the UK over the next five years, warning that the Brexit trade deal dictated that by 2026 EV batteries assembled by UK firms would only be allowed to contain 50% international content or face crippling tariffs on EV exports.
Currently, only Britishvolt is planning a gigaplant in the UK, with construction in Blythe, Northumberland set to start on the GBP2.6 billion ($3.6 billion) plant in summer 2021, with initial production of 30 GWh/year scheduled for 2023 and construction of further phases out to 2027.
Society of Motor Manufacturers and Traders (SMMT) CEO Mike Hawes has also repeatedly called for UK investment in battery gigafactories.
When calling for the draft EU-UK Brexit agreement to be ratified at the end of 2020, he said that the tariff-free, quota-free trade that industry had called for had been secured in principle.
“However, the six-year phase-in period and special provisions for EVs and batteries now make it imperative that the UK secures at pace investment in battery gigafactories and electrified supply chains to create the world-leading battery production infrastructure to maintain our international competitiveness,” Hawes said at the time.
He echoed the same sentiment on Feb. 15 in a statement on the future of UK’s largest automotive business, saying that that the UK government needed to provide advanced manufacturing its full support, with a policy framework and plan for growth that reduced costs, accelerated domestic battery production and electrified supply chains.
Traditionally, the majority of lithium ion battery cells have been manufactured in Asia, which has led to long supply chains and high battery and EV costs.
There has a been a big push in the UK and Europe to build battery gigafactories to meet rising EV demands and lower battery, and therefore EV, costs to promote e-mobility and the green revolution.
As part of its 10-point climate change plan, the UK government is targeting the end of sales of new gasoline and diesel cars and vans by 2030, 10 years earlier than planned.