EU and UK Car Industries Seek Delay in Brexit EV Tariffs

The Push for a Tariff Delay

The EU and UK car industries are pressing the European Commission to adjust the Brexit trade deal and suspend tariffs on imports of electric vehicles for a second time. They argue that meeting the conditions set for 1 January 2027 for tariff-free sales is not feasible due to strict rules of origin over what products can qualify for tariff-free trade under the EU-UK Trade and Cooperation Agreement.

Battery Production Challenges

Under the 2020 Brexit deal, 55% of a car's value had to be made in Europe by 1 January 2027 to avoid tariffs, with specific requirements for battery production. However, the industry has expressed concerns that these targets cannot be met, with estimates suggesting that only 'just under 20%' of batteries will be made in the EU by 2027.

The Data Analysis

• Originally, 30% of battery packs and battery cells were to be made in the EU or the UK within years of the deal.
• By 2023, it was clear that this target was not achievable due to Covid and semiconductor shortages caused by Russia's invasion of Ukraine.
• The European Commission previously agreed to suspend the rules for three years until the end of this year.

The Impact Analysis

The struggles in ramping up battery production in the EU and the UK have been hampered by China's stranglehold on critical raw materials and the high cost of battery manufacturing in Europe. Industry leaders are calling for a 'policy shift' at the European Commission to accelerate the transition and avoid self-defeating tariffs.

The Prediction

With European leaders set to meet on 18 June and China on the agenda, the industry's pleas come amid fears of over-production in China and the favourable exchange rate causing crises for manufacturing and potentially cannibalising European industry. A delay in tariffs is crucial to protect the long-term automotive partnership between the UK and EU and Europe's wider competitiveness.