According to sources cited by the Financial Times, Nissan has warned ministers that it could be forced to shutter the largest car factory in Britain if the EU fails to include the UK in its 'Made in Europe' rules. This warning was characterized as outlining an 'existential threat' to the plant's future, stemming from the risk of being locked out of access to EU incentives, particularly for corporate fleet sales which account for approximately 60% of the European car market. However, Nissan GB has not threatened to close the Sunderland factory, according to official company sources, which note the plant employs around 6,000 people and produces a new car every two minutes.
The European Union is developing new regulations known as the 'Made in Europe' rules, designed to bolster the bloc's struggling €2 trillion industrial base against growing competition, particularly from China. These rules would require at least 70% of new electric vehicle components to have been produced in EU countries for vehicles to qualify for various incentives. Manufacturers need to meet this 70% threshold for electric, hybrid, and hydrogen fuel cell cars to be eligible for public subsidies, public procurement, and leasing schemes. While the UK and Japan have been included in the main element of the rules to qualify for incentives, the UK is at risk of being omitted from some key markets, including lucrative corporate fleets. Under the European Commission's recommendations, only vehicles for corporate fleets and small electric vehicles assembled within the EU would be eligible for Made in Europe benefits.
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The discrepancy between Nissan's private warnings and public statements appears to stem from the nature of the discussions. In private meetings with government officials, Nissan executives are reported to have forcefully outlined the severe commercial consequences and potential closure scenario should the UK be excluded from critical parts of the scheme. Publicly, the company maintains a stance focused on regulatory complexity and competitive disadvantage. The rules risk 'creating confusion and adding unnecessary complexity for the industry,' a Nissan GB spokesman stated, criticizing the proposal's different definitions for key segments.
The proposed rules would put Nissan, Jaguar Land Rover, and Toyota at a significant competitive disadvantage to those making cars on the continent. This could trigger executives to reconsider their production bases in Britain, as well as those producing car parts here. The Society of Motor Manufacturers and Traders (SMMT), the UK's automotive industry trade body, has labeled the draft rules as discriminatory, warning they could damage the £70 billion annual trade relationship between the UK and the EU and potentially breach the EU-UK Trade and Cooperation Agreement.
The rules risk 'creating confusion and adding unnecessary complexity for the industry'.
The UK has been intensively lobbying for full access to the scheme, with business secretary Peter Kyle taking the potential threat to Britain's car makers 'really seriously'. The specific measures the UK government is taking in its lobbying efforts to ensure inclusion in the Made in Europe rules are not fully detailed. The context of the Sunderland plant's current operations adds to its vulnerability, with reports indicating it is operating at only around 30% capacity due to weak demand.
The 'Made in Europe' rules are part of the broader Industrial Accelerator Act (IAA), which aims to subsidize electric vehicles to counter Chinese competition but restricts benefits to products with high EU value creation. The potential economic impact on the UK car industry if the rules are implemented without full UK inclusion remains a critical unknown, with industry leaders expressing grave concerns. Whether other car manufacturers like Jaguar Land Rover and Toyota have issued similar warnings or statements regarding the rules is currently unclear. The timeline for finalizing and implementing the Made in Europe rules by the European Commission is another crucial unknown, as is how likely it is that the EU will modify the rules to include the UK in all key markets.