The EU and UK car industries are urging the European Commission to adjust the Brexit trade deal and suspend, for a second time, tariffs on imports of electric vehicles.
Both car industries have expressed concerns that they will not be able to meet the conditions, set for Friday 1 January 2027, for tariff-free sales. This is because of the strict rules of origin over what products are able to qualify for tariff-free trade under the EU-UK Trade and Cooperation Agreement. According to the 2020 Brexit deal, 55% of a car’s value had to be made in Europe by 1 January 2027 to avoid tariffs, but 70% of the battery pack and 65% of the battery cell also had to be made in Europe.
It was originally believed that 30% of battery packs and battery cells would be made in the EU or the UK within years of the deal, with the rules of origin regime incentivising investment in domestic battery manufacturing, but by 2023, it was clear that this was not the case. These delays have been caused by a multitude of factors including: the COVID-19 pandemic in 2020; shortages of semiconductors caused by Russia’s invasion of Ukraine in 2022; and China’s monopoly on critical raw materials that are needed for the creation of battery cells.
Under mounting pressure from the car industry, the European Commission agreed to suspend the rules for three years until the end of 2026, but, with months to go, the industry has told the commission that it cannot meet the extended 'made in Europe' battery targets. It is estimated that under 20% of batteries will be made in the EU by 1 January 2027, according to Jonathan O’Riordan, International Trade Director at the European Automobile Manufacturers’ Association. In the UK, the level is higher, but still below targets, according to industry estimates.
While the European Commission has introduced several laws to help promote production, setting up local industry is costly and time-consuming. European leaders will meet on Thursday 18 June to discuss the next steps.