The risk of electric cars jumping in price by thousands of pounds means the Government needs to “urgently” secure an EU deadline extension to avoid stricter post-Brexit trade tariffs, vehicle makers have warned.
The industry is calling for a two-year delay to new “rules of origin” being imposed on exports of battery-powered vehicles and their components from January, after i revealed that the average cost of an electric car in Britain could rise by £5,000 without a compromise.
The Society of Motor Manufacturers and Traders, the respected body that represents all car makers in the UK, said an agreement to avoid a financial cliff edge is badly needed.
This should be achievable without renegotiating the Trade and Co-operation Agreement (TCA) between the UK and EU, and car manufacturers across Europe support a delay. But some on the continent believe that tariffs would help stimulate battery production within the bloc to avoid reliance on Chinese imports.
A spokesperson for the SMMT told i: “Current rules of origin for batteries pose a significant challenge to manufacturers on both sides of the Channel, with the prospect of tariffs and price increases on electric vehicles that would discourage consumers from buying the very models needed to achieve climate change goals.
“We look to the EU and UK to agree urgently a pragmatic solution, something which is perfectly possible within the existing UK-EU TCA framework.”
Volkswagen said that it is among the companies in favour of a two-year delay, following criticism of the impending deadline from Jaguar Land Rover and Vauxhall’s parent company Stellantis.
A spokesperson for Volkswagen Group told i: “We are closely monitoring and evaluating the situation in relation to the rules of origin requirements for our products in close cooperation with all Volkswagen Group brands and the wider automotive industry.
“The automotive industry in the EU has commented that they see difficulties meeting the next phase of rules of origin requirements (from 2024) and would welcome the extension of the current rules of origin for battery cells, battery packs and electric vehicles until the end of 2026.”
The UK maintains that pushing back the date is in everyone’s interests, saying in May that tariffs would be a “problem for manufacturers across Europe not just here in the UK”.
Recent discussions between Trade Secretary Kemi Badenoch and her European Commission counterpart Valdis Dombrovskis are said to have been “constructive and laser-focused on finding a solution that works”, according to a Department for Business and Trade source.
How the new trade rules could affect the car industry
Both Jaguar Land Rover and Vauxhall maker Stellantis have previously criticised the current requirements of the Brexit Trade and Co-operation Agreement (TCA) negotiated by Boris Johnson and the EU.
In May, both firms called for a new timeline to delay the introduction of the so-called “rules of origin” covering where parts must be sourced from, which they say will make their vehicles uncompetitive.
Their remarks added to pressure on Rishi Sunak and the Government to negotiate a delay with the EU to the “rules of origin” beyond January 2024.
Under current rules, 40 per cent of the value of an electric vehicle should originate in the UK or EU to qualify for trade without tariffs.
But this percentage will rise to 45 per cent from the beginning of next year, while for battery packs the threshold will be 60 per cent.
From 2027, this will be increased to 55 per cent for the value of an electric vehicle and 70 per cent for battery packs.
It is part of a bid by both the UK and EU to boost their homegrown electric vehicle industires and rely less on Chinese imports.
But any vehicles that do not meet the requirements face 10 per cent tariffs.
Car makers say they are not ready for the changes and are pushing for more time.
Tata Group – the owner of Jaguar Land Rover – has struck a deal with the Government to build an electric car battery factory in the UK but production is not expected to start there until 2026.
Car manufacturing remains one of the country’s highest-value industries, employing 182,000 people in the UK and contributing £67bn a year in turnover to the economy.
But with the average vehicle requiring around 500 components sourced from all over the world, it was always one of the industries most vulnerable to the UK’s decision to leave the EU.
