Mercedes Chief Warns: Excluding UK from 'Made in Europe' Rule Threatens EU Auto Sector

The head of Mercedes-Benz, in his role as president of the European Automobile Manufacturers’ Association (ACEA), warned that excluding the UK from the EU's "Made in Europe" legislation could be a strategic decision to harm the automotive sector across the bloc. This statement comes ahead of anticipated negotiations on the Industrial Accelerator Act (IAA), which may leave the UK car industry outside of significant EU contracts.

The legislation, known as the Made in Europe law, is designed to shield local industries from non-EU competition, primarily targeting China, which currently enjoys a significant trade surplus with the EU. However, this could also impact key allies like the UK, Norway, Turkey, and Switzerland.

Ola Källenius, during a briefing in Brussels, emphasized that excluding the UK would undermine both the UK's and the EU's car industries, weakening competitiveness. The focus of the IAA is to enhance European industrialization and develop local supply chains.

Despite efforts by Andy Burnham to secure UK inclusion in the legislation, there has been resistance, notably from France. The UK Prime Minister plans to address this issue at the upcoming UK-EU summit on November 20, despite the EU's aim for a political agreement by December.

The EU has encouraged the UK to adopt tariffs on Chinese vehicles, a move implemented by the EU in 2024, to strengthen its case for inclusion in the Made in Europe initiative. However, UK Business Secretary Jonathan Reynolds indicated that such tariffs are not currently planned.

The ACEA is also advocating for a delay in the implementation of 10% tariffs on UK electric vehicles (EVs) imported to the EU and EU EVs exported to the UK. The deadline for these tariffs is approaching, causing concern among manufacturers. The tariffs are part of the post-Brexit Trade and Cooperation Agreement (TCA), intended to encourage battery production in Europe, which constitutes a significant portion of a car's cost. Due to insufficient local production capabilities, cars not meeting these criteria would face a 10% tariff starting next year, unless further suspension is granted.

Additionally, the EU is increasingly concerned about China's trade surplus, leading to an agreement with Beijing to cut hybrid electric car sales by half over four years. A senior EU official noted that increasing EU exports is no longer a viable solution for rebalancing trade relations with China.