Electric Cars: Export to EU

Lord Johnson of Lainston Excerpts

Thursday 2nd March 2023 Lords Chamber

[Lord Fox]

To ask His Majesty’s Government how they will ensure that electric cars built in the United Kingdom after 2024 meet the country-of-origin requirements, such that they can continue to be exported to the European Union tariff-free.

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

The modern rules of origin we negotiated with the EU underpin our unprecedented zero-tariff, zero-quota trade agreement. These rules were developed with industry to reflect the needs of UK electric vehicle manufacturing. We are aware of the supply chain challenges, also caused by external factors, including Russia’s war in Ukraine. This is why our officials are in constant dialogue with the sector to support it to access the maximum benefits of this agreement and other assistance.

[Lord Fox (LD)]

My Lords, I thank the Minister for his Answer. He did not say what his department is doing about the clause in the trade and co-operation agreement that kicks in at the end of this year—in 2024—where, if there is not 40% of local content in UK-manufactured electric vehicles, they will be subject to up to 22% tariffs when exporting to the EU, and that will have a knock-on effect on other free trade agreements. Will the Minister undertake specifically to go back to the European Union to look at that clause, because we will not be able to export electric vehicles from this country economically unless it is put on hold at the end of this year.

[Lord Johnson of Lainston (Con)]

I am very grateful to the noble Lord for raising this point, and I hope I answered his Question to some extent. It is very important that we invest in future vehicle manufacture in this country. In the papers I brought with me to this great House are lists of the enormous number of subsidies, grants, credits and other mechanisms of support to ensure that we can build here the electric vehicles and the batteries we need, homegrown in the United Kingdom, to ensure that we have almost 100% of content of these vehicles when we sell them—not just to the European Union but all around the world. It is important to mention the automotive transformation fund and how it has helped Stellantis and Nissan, both of which are successfully working on producing batteries following, crucially, a critical mineral supply deal with Indonesia which I personally signed one month ago. There is work to do, let us be under no illusion, but the Government are committed to it. Huge amounts of money and a great deal of resource, including the attention of His Majesty’s Government, have been committed to it.

[Lord Woodley (Lab)]

My Lords, I declare an interest as a former member of the Government’s Automotive Council UK, looking at investment in this important industry of ours. The Americans have set aside £102 billion to encourage inward investment in new technologies, including electrification of the whole of their car and automotive industry. There is no doubt, looking at what we are putting aside here, that we are barely in the game. There is £850 million set aside to entice and encourage people here, which sounds a lot of money, but it is not, compared to what other people are doing. Jaguar Land Rover has asked the Government for half a billion pounds for a mega battery factory in Somerset, as opposed to Spain. It is crucial for the long-term interest of our industry that we do not let this investment disappear from our shores, otherwise, my dear friends, there will be no industry in this country in 10 years’ time.

[Lord Johnson of Lainston (Con)]

I greatly thank the noble Lord for his intervention and for the important promotion of this industry. I say to anyone who is thinking of locating their business in Spain that Ferrovial announced yesterday that it is leaving Spain because it is one of the least hospitable environments in Europe to do business, whereas we know that Britain remains the top destination for doing business in Europe and the second most important destination for foreign direct investment in the world. It is important to remember and celebrate that last year we raised more money for technology and start-ups, which is precisely what we are talking about with the battery and EV industry, than France and Germany combined, more than China, and more than India. It is a testament to this Government’s efforts to ensure that we have the subsidies and support, including government support, to enable our citizenry—some of the best educated in the world—to take advantage of this. I take the point made by the noble Lord very seriously. We are doing a huge amount: the facts bear it out, the money is coming here and so is the industry.

[Lord Hannay of Chiswick (CB)]

My Lords, would the Minister perhaps be so kind as to answer the question that the noble Lord, Lord Fox, asked about the use of the machinery of the trade and co-operation agreement to take up with the European Union any difficulties that might arise through a change in circumstances described, because it is really important? With the presumably better climate that now exists for our dealings with the European Union, surely this is the time to raise the matter in the appropriate top-level committee of the TCA.

[Lord Johnson of Lainston (Con)]

We work with all our partners to ensure that trade with the European Union is as seamless and friction-free as possible, and I know that we all congratulate the Prime Minister on the resolution of the situation in Northern Ireland. I believe personally and passionately from my conversations over the last few days alone—including at a breakfast I attended with the Spanish Business Council—that this will allow a substantial number of the market access barriers, the other areas of friction, to be removed. This was demonstrated when we saw the reintroduction of discussions on the Horizon programme almost immediately following the announcement of the Windsor Framework, so I am very confident that a practical solution can be reached, but these are short-term measures. The reality is that we need to build our own capacity in this country, invest in it and support it, and that is exactly what we are doing.

[Lord Swire (Con)]

My Lords, is not the truth of the matter that unless we rapidly increase the back-up with electric vehicle charging in this country, there will be no electric cars going to the EU, or anywhere else for that matter, from this country? What confidence can my noble friend give to those who are considering switching to electric vehicles or already have them, because the infrastructure is lagging behind the demand, and if the Government seek to achieve their targets, they need to invest more within this country?

[Lord Johnson of Lainston (Con)]

My noble friend is clearly hoping to upgrade his car from his 23 year-old Range Rover. We are very aware of the need, as we are as individuals in this House, to ensure that the infrastructure is there. It takes time, it is very costly, there has been government investment, but he is absolutely right that further focus is required, and I am very happy to write to him on the specifics, because it is important that everything fits together.

[Lord Bassam of Brighton (Lab)]

My Lords, it is all well and good the Minister telling us all this, but a new report from the Energy & Climate Intelligence Unit warns that UK motorists could miss out on £9 billion-worth of savings on electric vehicles due to the shrunken second-hand car market, which could be as many as 2.1 million vehicles smaller by 2033, if the Government continue to fail to boost EV take-up. This will be bad for drivers, bad for the country and bad for the environment, with low-income drivers forced to continue running petrol cars. What positive steps will the Government now take to buck this trend and ensure a viable second-hand car market for EV vehicles?

[Lord Johnson of Lainston (Con)]

It strikes me that, if you want to have a second-hand car market in EVs in this country, you need to build more new EVs in the first place. That is why we are investing heavily in making sure both that we have the facilities and capacity to procure critical minerals to enable us to make batteries, which are the core component in such cars, and that we have the partners in this country to develop the battery technology. We are not simply looking at manufacturing; we are also investing heavily in the R&D around battery design. Our real strength and core defence against the future are our brains. The investment that we have made in concepts, such as our investment of more than £500 million in the Faraday Institution in Coventry, is a good representation of the work that we are trying to do. This does not happen overnight. It is truly a national endeavour. I hope that the noble Lord is reassured that the Government’s focus is on this incredibly important and topical subject.

[Baroness Randerson (LD)]

My Lords, there was news this week that the failed Britishvolt company has been bought by a newly established company based abroad and that the site will not be used as intended to create a much-needed gigafactory to supply manufacturers of electric vehicles. Can the Minister clarify how the new plans fit into the Government’s priorities for the industry? What funding has already been given to this project? Are there plans to give it any further funding?

[Lord Johnson of Lainston (Con)]

This is an ongoing commercial issue so it would not be appropriate for me to comment on some of the specific points that the noble Baroness makes. However, we did support Britishvolt originally—I am happy to write to her with the specific numbers—as we have supported all battery endeavours in this country. It is the right thing to do. These are new technologies and companies. They are being created by entrepreneurs taking significant risk; we should celebrate that. It is not a straight line, however. We must be prepared for disruption in this market; there will be volatility. The important thing is that the Government stand behind this industry. We want a car industry in this country that builds high-quality electric vehicles with batteries made here, to sell to the rest of the world and take advantage of our post-Brexit vision for Britain.