The latest Brexit trade rules surrounding electric vehicles have sparked concerns among European carmakers, predicting a potential loss of £3.75 billion within the next three years. The rules, aiming to ensure that EU-produced electric cars are made primarily from locally sourced parts, have left manufacturers unprepared on both sides of the Channel. The European Automobile Manufacturers Association (ACEA) has also warned that these measures could lead to a decrease in output from EU factories, resulting in a loss of 480,000 vehicles, ultimately affecting consumers as prices rise.
The primary issue lies in the “rules of origin,” which will take effect in January. These rules apply to car shipments between the UK and the EU under the terms of the Brexit trade deal, known as the UK-EU Trade and Cooperation Agreement. These rules dictate that electric vehicles must have batteries produced within either the UK or the EU. Failure to meet these criteria will result in 10% tariffs when transporting cars across the Channel in either direction. While the rules were implemented to protect the European industry from cheap imports, the slow pace of battery production in Europe has caused a struggle for car manufacturers to meet the new requirements.
European manufacturers face a significant challenge as the UK remains their largest export market, with 1.2 million vehicles arriving at UK ports last year. Similarly, more cars built in the UK are transported to the EU than any other region. Imposing steep tariffs could lead to increased production costs for electric cars, potentially raising prices and making them less competitive in the global market. ACEA is urgently requesting a three-year delay in implementing the new rules and is appealing to the European Commission to take action.
Renault’s Chief Executive and ACEA President, Luca de Meo, has expressed concerns regarding the negative impact on European electric vehicles’ consumer prices at a time when market share needs protection against intense international competition. De Meo fears that failure to address the issue would result in a market shift towards global manufacturers, diminishing the European industry’s presence. Resolving this matter requires an agreement between the UK and the EU to postpone the implementation of the rules.
UK Business Secretary, Kemi Badenoch, has expressed optimism regarding reaching a deal, but the EU’s Internal Market Commissioner, Thierry Breton, seems less accommodating. Breton believes that reopening the Brexit deal to satisfy the motor industry would be incorrect. The European Commission acknowledges that Brexit has altered the trade relationship between the UK and the EU and emphasizes the objective of developing a robust and resilient battery value chain within the EU.
Sigrid de Vries, Secretary General of ACEA, recognizes the political sensitivity surrounding Brexit-related topics, understanding the European Commission’s reluctance to make changes. She clarifies that ACEA is not seeking any fundamental alterations but rather requesting adjustments to the current arrangements. Meanwhile, Mike Hawes, Chief Executive of the UK’s Society of Motor Manufacturers and Traders, remains optimistic about reaching an agreement, although he anticipates the negotiations may go down to the wire, similar to the Brexit process.
Trade officials from the EU and the UK are scheduled to meet this week in London. It remains uncertain whether the new rules will be addressed during the discussions. As the automotive industry anxiously awaits a resolution, challenges related to the promotion of electric vehicles persist, including the necessity to sell more electric cars to meet emission targets and the potential impact of the government’s delay in banning petrol cars on the UK’s commitment to achieving net-zero emissions.
The outcome of these trade discussions will significantly impact European car manufacturers, their ability to remain competitive in the electric vehicle market, and the future of the industry amidst intense global competition. It is essential for policymakers to carefully consider the potential consequences and find a balanced solution that supports both the environmental goals and the economic success of the European automotive sector.
