The UK car industry has said incoming tariffs between the UK and the EU could raise the price of imported electric cars by as much as £3,400 unless a solution is found by the end of the year.
The Brexit trade deal between the UK and EU gave carmakers until 1 January 2024 to source batteries from within Europe or face 10% tariffs when exporting to each other. However, the supply of European-made batteries has failed to meet demand, meaning carmakers face the new tariffs from next year under these “rules of origin”.
The Society of Motor Manufacturers and Traders (SMMT), the UK car industry lobby group, and its European counterpart have called for the two sides to come together to extend the deadline for the rules of origin tariffs to prevent cost increases that would dent electric car demand. Petrol and diesel cars will not be affected by these tariffs.
A deluge of EU “gigafactories” are being built, including one in the UK belonging to Tata, the owner of the Jaguar and Land Rover brands. They will eventually allow European manufacturers to reduce reliance on batteries imported from Chinese, Korean and Japanese suppliers, and ensure jobs and expertise remain in Europe.
However, most of the facilities will not be fully on stream by next year, making tariffs hard to avoid. The industry argues it would have little choice but to pass the cost on to customers.
Analysis by the SMMT found that the price of EU-made electric cars in Britain would increase by an average of £3,400, while the price hike on cars going to the EU from the UK would be £3,600 (€4,140).
Carmakers on both sides of the Channel, and the UK government, agree that they want a delay to the rules. Ford, Jaguar Land Rover and Stellantis were among those who called as early as May for the terms to be renegotiated. However, the EU’s industry commissioner, Thierry Breton, said last month that the Brexit deal should not be reopened simply to appease large carmakers.
The European Automobile Manufacturers’ Association (ACEA), the European lobby group, said it had not received any signal from the European Commission that it was considering extending the deadline.
Sigrid de Vries, the ACEA’s director general, said: “Massive investments are being made in European battery supply chains – including by European vehicle manufacturers – but it would take more time to build up the kind of scale needed to meet the rules of origin.”
Mike Hawes, the SMMT’s chief executive, said: “Our manufacturers have shown incredible resilience amid multiple challenges in recent years, but unnecessary, unworkable and ill-timed rules of origin will only serve to set back the recovery and disincentivise the very vehicles we want to sell.
“Not only would consumers be out of pocket, but the industrial competitiveness of the UK and continental industries would be undermined. A three-year delay is a simple, commonsense solution that must be agreed urgently.”