Experts have called on the European Union to amend its upcoming policies to ensure that the UK remains a "trusted partner" in the automotive sector, or risk disastrous consequences.
The EU's proposed Industrial Accelerator Act introduces new "Made in EU" measures designed to protect companies across the continent from outside competition, especially from China.
These measures aim to stimulate manufacturing across Europe, as well as create jobs over the coming years and boost net zero prospects for sectors including the automotive industry.
At present, the UK is not included as one of the member states, nor a "trusted partner", prompting concerns from the Society of Motor Manufacturers and Traders (SMMT).
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The trade body has called on the European Union to include the UK as a trusted partner to maintain its "long-nurtured, mutually beneficial trading relationship".
Data from the SMMT states that the EU-UK automotive trading relationship is worth €80billion or £69.6billion, while 70 per cent of automotive products imported into the UK come from the EU, which is worth €60billion (£52.2billion) to the bloc.
More than three in five vehicles registered in the UK are built in factories across the EU, with just UK-made cars representing just three per cent of cars sold in Europe.
The SMMT warned that if the EU excluded the UK from the "Made in Europe" policy, it would inflict "significant harm" on both actors and disrupt supply chains.
The SMMT has warned that the UK car industry could be hammered if the EU continues with its proposals
|GETTY
Mike Hawes, chief executive of the SMMT, said: "Brexit put the resilience of our shared industry under enormous stress, but manufacturers have overcome those challenges to grow our trade in electrified vehicles alone to record levels.
"If the Industrial Accelerator Act proceeds as drafted, it threatens to reverse progress, undermining the Trade and Cooperation Agreement all sides worked so hard to deliver and jeopardise our respective competitiveness, damaging to jobs, investment and innovation."
He added that the UK and EU should "seize the opportunity to deepen collaboration and unlock the full promise" of the Trade and Cooperation Agreement.
Mr Hawes also highlighted that continued collaboration would help protect the industry from global competition and instability across the world.
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The SMMT has warned of a 'shared risk' to the UK and EU automotive industry
|SMMT
The SMMT has consistently called for the UK to be included in the "Made in EU" framework, which would see UK-built vehicles and components considered equivalent to EU products.
Brussels has touted the benefits of the IAA, including launching measures to ensure foreign direct investments would bring value.
One of the biggest automotive benefits outlined by the EU includes €100million (£87million) for emerging sectors, such as electric vehicles and batteries.
The basis of the IAA was created by the Draghi Report, which emphasised the threat of Chinese manufacturers to the electric vehicle market.
BYD confirmed that its European HQ and an R&D facility would be opening in Hungary
| BYDThe EU has already taken steps against Chinese companies, accusing them of "unfairly" profiting from competition rules by selling cheaper electric vehicles across the continent.
These included a tariff of 17 per cent for BYD, 18.8 per cent for Geely, 35.3 per cent of SAIC, and a 7.8 per cent rate for Tesla's Shanghai factory.
In response, some manufacturers have expressed interest in developing factories and production sites across Europe, with BYD opening facilities in Hungary, and Chery Commercial Vehicles choosing Liverpool as its European hub.