One of the world's largest automakers has called on the UK and EU to urgently renegotiate their post-Brexit trade agreement to avoid the risk of new tariffs being imposed on vehicle exports.

Stellantis, whose brands include Vauxhall, Opel, Peugeot and Fiat, warned that unless changes are made to rules of origin surrounding batteries for electric vehicles, it could be forced to move operations away from the UK onto the continent in order to avoid new tariffs.

Under the terms of the Brexit agreement, as of January 2024, vehicles imported from the UK to the EU must have at least 45 percent of their components by value originate in either the UK or the EU. This will rise to 65 percent in 2027 and those that fail to meet this threshold will be subject to tariffs of ten percent.

However, Stellantis has warned that rising costs for raw materials, due to the Covid pandemic and rising energy prices, mean it will be unable to comply with these rules of origin requirements. 

Presently, the majority of materials needed for EV batteries are imported from Asia and, while there are plans to greatly increase manufacturing in the EU and UK, they will not be able to meet demand by the deadline.

The carmaker has therefore urged both sides to amend the EU-UK Trade and Cooperation Agreement to maintain the current rules of origin until at least 2027. It warned that if it becomes uncompetitive to export vehicles from its UK plants to the EU due to tariffs, it would have to close its UK operations.

Currently, the firm manufactures Fiat and Vauxhall electric vans at its plant in Luton, and is expected to begin production in Ellesmere Port later this year.

BBC News reports that other UK manufacturers have also raised similar concerns with the government, while bosses from Stellantis are due to meet with business secretary Kemi Badenoch to discuss the issue this week.

Commenting on the warning, Mike Hawes, chief executive of industry body the Society of Motor Manufacturers and Traders, said: "Rules of origin for batteries pose a significant challenge to manufacturers on both sides of the Channel, with the prospect of tariffs and price increases which discourage consumers from buying the very vehicles needed to achieve climate change goals."