The restrictive rules on electric vehicle trade between the EU and UK are set to come into force in six months. These require ‘rules of origin’ compliance, meaning electric car batteries must be assembled in Europe to be exempt from tariffs.
The tightened rules, due from 2024, require all battery parts (and some battery material) to be produced either in the EU or UK to qualify.
At the moment, most electric car batteries are sourced from China.
If the rules aren’t changed, cars built in Europe and imported into the UK face a 10 percent tariff. The UK is the largest export market for the EU car industry, and accounts for one in four EV exports.
“Europe has not yet established a secure and reliable battery supply chain that can cater to these more restrictive rules right now,” said Sigrid de Vries, director general of EU auto trade body ACEA.
“Time is needed to build up the required capacity… In the meantime, vehicle manufacturers must rely on battery cells or materials imported from Asia.
“We are asking the European Commission to extend the current phase-in period by three years.”
Without a delay, ACEA says the 10 percent tariff would cost nearly €4.3 billion over the three-year period from 2024 to 2026.
“This would be detrimental not only to the EU auto industry, but also to the European economy,” added Sigrid de Vries. “As we face increasing competitive pressures from abroad, the application of these rules would have severe consequences for electric vehicle manufacturing in Europe.”
The ACEA estimates that, without a delay, tariffs could lead to a cut in EV production in the EU by up to 480,000 units. This is the equivalent output of two average-sized car factories.
Chinese-made EVs already make up around a third of the UK market, despite a 10 percent customs duty.
If European car makers are forced to pay the same tariff, said de Vries, “they will clearly lose ground to third-country competition. Failure to act now will hamper our ability to remain competitive… and lead to lost market share – which will be extremely difficult to regain.”
The European Commission has not yet commented on calls to delay the post-Brexit trade rules.
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