Let’s discuss the trade agreement between the UK and the EU after Brexit has rules of origin that may endanger importing electric cars from the EU to the UK. Under these rules, electric vehicles (EVs) traded between the UK and the EU must. Almost half of the parts used are sourced from either of the regions and face 10% tariffs. This could make EU-made EVs more expensive in the UK, making them less competitive against domestically produced EVs.
The EU automotive industry is concerned that these rules could significantly impact their exports to the UK. In 2022, the EU exported 139,000 electric vehicles to the UK worth €5.1 billion. If these rules were to effect, this would amount to €510 million in tariffs.
The UK government has said it is “engaged in a dialogue” with the EU about the rules of origin. However, whether the UK can persuade the EU to change the traditions is still being determined.
If the rules are not changed, it could significantly impact the UK’s electric vehicle market. The UK government has set a target for 2030 to cease the sale of new petrol and diesel cars. However, if EU-made EVs become more expensive in the UK, it could make it more difficult for the UK to meet its net zero emissions targets.
The UK government has said it is “committed to supporting the UK’s automotive industry”. However, it is still being determined how the government will mitigate the impact of the rules of origin on EU exports of electric cars to the UK.
The situation is still fluid, and it is possible that the UK and the EU could reach a compromise on the rules of origin. However, as it stands, the authorities could have a significant impact on the UK’s electric vehicle market.
Exports of ACEA members’ electric vehicles to the UK were valued at about €4.3bn in 2022. Still, with a recovery in the supply chain and moving away from combustion engines, the market is projected to boom. ACEA represents 75% of the auto industry in the EU.
“We expect total sales to be around €25bn to €30bn by 2026,” said Jonathan O’Riordan, ACEA’s international trade director. A tariff of 10% would add costs of up to €4.3bn passed on to the consumer, absorbed by the industry or a mixture of both over the three years between 2024 and 2027, ACEA said.
ACEA formally wrote to the commission mapping out the costs, arguing it needed another three years for Europe to scale up battery supply and chemical refinement, which is critical to the process.
Currently, the trade deal requires that the battery cell be assembled in Europe. Still, from next year the parts, including the cathode material, must also originate in Europe, including the UK, which ACEA says is impossible.
This was echoed by Stefan Fuehring, one of the most senior EU officials in the trade negotiations, who warned amending the trade deal even in 2025 was “a long shot”, pointing out the review clauses concerned “implementation” of the agreement and nothing more.
A spokesperson for the EU said it had “taken note” of ACEA’s estimates.
One diplomat said the European Commission was “just one voice” in this, and its job was to be “inflexible” and “protect agreements”.
