The UK car industry is pressing for a two-year postponement of Brexit tariffs on electric vehicles traded with the EU, after the European Commission proposed a shorter delay to rules that are set to come into force on 1 January unless both sides reach a deal.
The dispute centres on "rules of origin" requirements included in the 2020 Brexit deal. These rules require British and European electric cars to use batteries made in the UK or EU with locally sourced materials, or face 10% tariffs. The rules were originally scheduled to start on 1 January 2024 but were delayed following an agreement in December 2023 between the EU and UK.
The European Automobile Manufacturers Association, a Brussels-based lobby group, has warned that the tariffs pose a serious threat to Europe's automotive sector. The group estimated that 82% of EU electric car and van exports to the UK would incur the 10% customs duty in 2027 under the rules, creating costs of €1.47bn, equivalent to £1.23bn, in the year ahead alone. The European Commission has shared technical proposals with the automotive industry to delay the start of the tariffs, understood to centre on a one-year postponement and including adjustments to customs procedures and origin calculation methodologies that could provide temporary tariff flexibility. However, these proposals have not yet been formally presented to the UK government.
Several prominent battery manufacturing projects on both sides of the Channel have collapsed since 2020, leaving carmakers heavily dependent on imports from China, Japan and South Korea rather than local production. While new battery projects have emerged, many are still not operating at the scale needed to satisfy European demand. An executive from the UK car industry said: "The industry will be really clear, two years minimum or we have the same discussion next year. Giga-industrialisation is happening in the EU and UK but it is not producing at the required volume yet." Mike Hawes, chief executive of the SMMT, the UK car industry lobby group, said: "The UK and EU must urgently agree pragmatic solutions to the challenges of Made in Europe and EV rules of origin, which if unresolved will cause severe damage to our deeply integrated industries."
The negotiations are expected to feature technical discussions beyond simply setting a time delay, and the topics are likely to be addressed at an EU-UK summit scheduled for the following week. The discussions will also cover whether Britain can be included in "Made in Europe" subsidies and whether the UK should align with EU tariffs on Chinese car imports.