Electric vehicle price rise threat from EU tariffs

The prices of many electric vehicles (EVs), which are sold or made in the UK and Europe, could increase by 10% or more from 2024 when tariff exemptions, agreed as part of the Brexit deal, end.

The UK-EU Trade and Cooperation Agreement (TCA) temporarily exempted EVs from rules that said products must be substantially made in Britain or the bloc to qualify for the EU’s zero tariff, zero quota regime, because EV batteries are predominantly imported from Asia.

Both the European Automobile Manufacturers' Association (ACEA) and the Society of Motor Manufacturers (SMMT) are asking for the rules of origin exemption to be extended from the December 31, 2023, when it is now due to end, because they say that there are not enough batteries being made in Europe.

If the exemption cannot be extended, many EVs moving between the EU and UK would pay a 10% tariff, increasing prices for fleets.

Mike Hawes, chief executive at UK automotive trade body the SMMT, said: “Rules of origin agreed in the UK-EU TCA must work for all parties and the UK and EU face challenges in ensuring there is adequate domestic battery production to meet the terms agreed.

“Given the unprecedented global turmoil since the TCA was signed, the EU and UK should look urgently at battery manufacturing capabilities across Europe and assess the risk of crippling tariffs on electrified vehicles being applied, affecting both sides, in little over a year at just the time we need to increase take up of these zero emission models.”

Under the TCA, a maximum of 45% of the value of products is allowed to originate from outside the EU in order to benefit from zero-tariff trade.

Until January 1, 2024, at least 40% of the content of EVs and 30% of batteries must originate from the EU or the UK. From 2024 until January 1, 2027, this increases to 45% of the vehicle and 50-60% of batteries. If this is exceeded, carmakers will have to pay a tariff of 10%.

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