UK Car Industry Seeks Two-Year Delay to Brexit EV Tariffs

The UK car industry is preparing to push for a two-year delay to Brexit tariffs on electric cars traded with the EU, as stakeholders seek to avoid a looming trade barrier. As the latest car industry news suggests, the sector is concerned that current rules of origin requirements for vehicle batteries will impose a 10% tariff on most electric vehicles traded between the two regions starting on 1 January.

The challenge for the car industry

The original Brexit deal, finalized in late 2020, mandated that electric vehicles must utilize batteries produced within the UK or EU using local materials to qualify for tariff-free trade. These regulations were designed to incentivize the development of a domestic lithium-ion battery supply chain. However, while some projects have emerged, many remain unable to produce at the scale required to meet European demand. Consequently, manufacturers remain heavily dependent on imports from China, Japan, and South Korea.

Industry leaders argue that a short-term extension is insufficient to allow for the necessary industrial scaling. While the European Commission has reportedly shared technical proposals with the automotive sector that suggest a one-year delay, some UK executives remain firm in their demand for a two-year minimum extension. They warn that without a longer window, the industry will face the same regulatory crisis next year.

The UK car industry is pressing for a two-year delay to avoid steep Brexit tariffs on electric vehicles.

Negotiations remain complex, as the UK and EU are also debating broader issues, including Britain's potential inclusion in "Made in Europe" subsidy schemes and the harmonization of tariffs on Chinese car imports. The European Automobile Manufacturers Association has highlighted the scale of the potential impact, estimating that 82% of EU electric vehicle exports to the UK could face a 10% customs duty by 2027, potentially adding over €1.47bn in costs next year alone. Mike Hawes, chief executive of the SMMT, emphasized that an urgent, pragmatic solution is essential to prevent severe damage to these deeply integrated industries.

Why it matters

The potential introduction of these tariffs threatens to increase costs for consumers and disrupt the supply chains of major manufacturers. If an agreement is not reached, the added financial burden could hinder the transition to electric vehicles by making them significantly more expensive for buyers across the UK and Europe.