Rules of origin for electric vehicle batteries

Wednesday 6 December, 2023

The UK automotive industry has today welcomed the European Commission’s proposal to extend the current rules of origin for electric vehicle batteries under the Trade Cooperation Agreement (TCA) until 2027 – and urged every government to back it. The Society of Motor Manufacturers and Traders (SMMT) said extending the rules for three years would avoid a tariff cliff-edge in just 26 days’ time, allowing the UK and EU automotive industries to continue to sell EVs into each other’s markets without penalty.

SMMT, alongside its EU counterparts, has warned consistently of the threat tougher locally sourced content requirements would pose to the industry on both sides of the Channel, if applied from 2024. While the industry has invested billions in EV production both in the UK and EU, local battery supply needs more time to expand to meet demand. If the rules go ahead as originally planned, EVs traded both ways would be subject to a 10% tariff – adding billions of pounds in costs, pushing up prices for consumers, and rendering both UK and EU manufacturers uncompetitive in each other’s markets. It would severely undermine the transition to zero emission mobility, sending the wrong message to consumers about governments’ commitment. The automotive industry is therefore calling for the urgent agreement of the proposal, followed by delivery at pace.

Mike Hawes, SMMT Chief Executive, said,

Adopting the Commission’s proposal would be a pragmatic solution, safeguarding the future of the EU and UK automotive industries, supporting motorists, the economy and the environment. Such an extension would avoid damaging tariffs on the very vehicles we need consumers to buy, allow UK and EU manufacturers to compete with the rest of the world and, crucially, give the European battery industry time to catch up. Above all, voting for the proposal will enable us all to cut carbon emissions while supporting growth and jobs across the entire EV supply chain. We urge every party to get behind it.

EU-UK trade in electrified vehicles has more than doubled under the tariff-free conditions provided by the Trade and Cooperation Agreement (TCA). The EU is by far the UK’s largest automotive – and indeed electric vehicle – market, and the UK sources almost half of all new battery electric vehicles from the EU. Any cost increase would act as a barrier to uptake, undermining their competitiveness.