UK automotive sector seeks two year extension on EU electric vehicle tariffs
British carmakers are lobbying for a longer delay to Brexit related battery rules, arguing that current proposals do not provide sufficient time for local manufacturing to scale.
By Vanessa Lopez ·
The UK car industry is preparing to advocate for a two year postponement of Brexit tariffs on electric vehicles traded with the European Union. This push follows an initial European proposal that suggested a shorter delay period. The tariffs are scheduled to begin on 1 January for the majority of electric cars moving between the two regions, unless a new agreement is reached to delay the implementation of battery rules of origin for a second time.
The underlying framework stems from the Brexit deal that was finalized on Christmas Eve in 2020. This agreement included a specific clause requiring that British and European electric cars use batteries manufactured in either the UK or the EU with local materials. If this requirement is not met, vehicles face 10 percent tariffs. Such regulations would not have existed had the UK remained a member of the EU.
These rules were originally set to take effect on 1 January 2024. The intent was to encourage the automotive industry to invest in local lithium ion battery manufacturing rather than relying heavily on the dominant Chinese battery sector. While the prospects appeared optimistic in 2020, the landscape changed significantly over the following three years. Several prominent projects on both sides of the Channel collapsed, leading the EU and UK to agree in December 2023 to extend the deadline.
New battery projects have since emerged to replace those that failed, but many are not yet producing at the scale required to meet European demand. Consequently, carmakers remain largely dependent on imports from China, Japan, and South Korea. Both UK and European manufacturers are united in their calls for another delay to the introduction of these rules of origin. However, an agreement has not yet been reached, with negotiations also covering whether Britain can access Made in Europe subsidies and if the UK should match EU tariffs on Chinese car imports.
These topics are expected to be part of an EU UK summit planned for next week. The European Commission has shared proposals with the automotive industry to delay the start of the tariffs, although these have not yet been formally presented to the UK government. The proposals are understood to be highly technical and essentially equate to delaying the start of the rules of origin by one year.
Some of the proposed measures include adjusting customs procedures and origin calculation methodologies. These changes could offer some temporary tariff flexibility. However, parts of the UK car industry believe that one year is not enough time for the sector to adapt and for battery gigafactories to reach necessary production volumes.
One executive in the UK stated that the industry will be very clear that a minimum of two years is required, otherwise the same discussion will recur next year. The executive noted that while giga industrialization is happening in both the EU and UK, it is not yet producing the required volume. Another source indicated that the negotiations would focus on the technical details of the proposals rather than simply aiming for a specific time delay.
The European Automobile Manufacturers Association, an influential lobby group in Brussels, has argued that the tariffs represent a serious concern for Europe’s automotive industry. The group estimated that 82 percent of EU electric car and van exports to the UK would face the 10 percent customs duty in 2027 under the current rules. This would add costs of 1.47 billion euros, or 1.23 billion pounds, next year alone.
