The UK car industry is preparing to push for a two-year delay to Brexit tariffs on electric cars traded with the European Union. This push comes after an initial European proposal suggested a shorter delay ahead of rules taking effect on 1 January.
Upcoming Rules of Origin Threaten Trade
Tariffs are scheduled to begin on 1 January for most electric cars traded between the UK and EU unless both sides agree to delay the implementation of battery “rules of origin” for a second time. The 2020 Christmas Eve Brexit deal included a clause requiring British and European electric cars to use batteries made locally with regional materials, or else face a 10% tariff.
These rules were originally set to start on 1 January 2024 to encourage investment in domestic lithium-ion battery manufacturing rather than relying on China. Although the EU and UK agreed to extend the deadline in December 2023 after several prominent projects collapsed, many replacement battery projects have yet to produce at the scale required for European demand, leaving carmakers dependent on imports from China, Japan, and South Korea.
Negotiations and Industry Concerns
Carmakers across the UK and Europe are united in calling for a delay, but an agreement is still pending. Discussions also involve debates over whether Britain can be included in “Made in Europe” subsidies and whether the UK should match EU tariffs on Chinese car imports, topics expected to form part of an upcoming EU-UK summit.
The European Commission has shared technical proposals with the automotive industry to delay the tariffs by roughly a year, though these have not yet been formally presented to the UK government. These proposals involve adjusting customs procedures and origin calculation methodologies to offer temporary flexibility.
However, parts of the UK car industry argue that more time is needed for gigafactories to reach sufficient production volumes. One UK executive stated: “The industry will be really clear – two years minimum or we have the same discussion next year. Giga-industrialisation is happening in the EU and UK but it is not producing at the required volume yet.”
The European Automobile Manufacturers Association warned that 82% of EU electric car and van exports to the UK would face the 10% customs duty in 2027 under the current rules, adding €1.47bn in costs next year alone.
Mike Hawes, the chief executive of the UK lobby group SMMT, stated: “The UK and EU must urgently agree pragmatic solutions to the challenges of Made in Europe and EV rules of origin, which if unresolved will cause severe damage to our deeply integrated industries.” He added that any agreement must remove the massive tariff liability starting on 1 January, remain workable for manufacturers, protect ongoing battery investment, and involve meaningful consultation with the UK industry.
