Stay informed with free updates
Simply sign up to the Electric vehicles myFT Digest — delivered directly to your inbox.
European carmakers have called for a delay to a “catastrophic” post-Brexit rule change that is due to hit most electric vehicles sold between the UK and the continent with 10 per cent tariffs.
They say stricter rules on what qualifies as a European-made vehicle from January 1 would cost the industry €1.5bn annually and expose them to stiff competition from China. Manufacturers are asking for the move to be phased in over five years.
In a letter to the European Commission seen by the FT, the European Automobile Manufacturers Association (ACEA) said that continued dependence on China for batteries and raw materials meant most vehicles would not qualify as EU-made under the rules drawn up when the UK left the EU.
The UK industry is in a similar position and many of its car exports to the EU face 10 per cent tariffs unless the change is delayed.
Brussels and London had already agreed to postpone the tougher requirements from 2024 to 2027.
Car manufacturers said at the time that the postponement would allow them to meet the tighter “rules of origin” that were intended to incentivise investment in European supply chains.
But the take-up of electric vehicles has been slower than expected while battery supply chains have taken longer to establish due to the collapse of Swedish battery maker Northvolt and other European manufacturers facing challenges in scaling up production.
“To avoid the catastrophic effect of widespread non-compliance, ACEA proposes a time-limited change to the rules for batteries,” said the letter from the lobbying group’s president, Mercedes boss Ola Källenius, and its director-general, Sigrid de Vries.
About 82 per cent of the 520,000 EV passenger cars and vans EU producers expect to sell in the UK in 2027, worth €17.9bn, would fall foul of the rules and have to pay the tariff.
“In addition to the direct cost of duties, the consequent negative impact on competitiveness will probably have a long-term detrimental effect on our members’ UK market share,” the letter added.
The UK is the biggest export market for EU carmakers and if sales dropped, it would inflict a “significant damaging effect on the development of both the emerging European battery and EV industries.”
Cars would need an EU or UK-made battery to avoid the tariffs from January 1. Acea instead proposes postponing a battery pack assembly requirement until 2030 and the additional requirement of originating cathode material until 2032.
In addition to additional tariffs on EVs and plug-in hybrids, the outlook for UK manufacturing is already clouded by concerns that cars built in Britain may not fully qualify for Brussels’ new “Made in Europe” subsidies.
The UK industry also backs delay. “At a time of intense global competition, neither side can afford measures that increase costs, undermine investment or reduce consumer choice,” Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, told the FT.
“The UK and EU must find a balanced, long-term solution that protects trade, supports supply chains and strengthens European automotive competitiveness,” he added.
A UK government said: “We are working with carmakers about rules of origin requirements for electric vehicles and will continue to engage with the EU to support industry on both sides of the Channel.”
The European Commission did not comment.
