Britain’s electric car industry faces a “cliff edge” when a delay to Brexit tariffs on vehicles traded between the UK and EU ends, a leading trade expert warned.
But a review of the post-Brexit trade agreement is not likely to resolve “rules of origin” requirements that have seen tariffs postponed until 2027, according to William Bain, head of trade policy at the British Chambers of Commerce.
i has been told the EU is set to offer Labour a reset of post-Brexit relations if Sir Keir Starmer wins the next general election, with 2026 earmarked for a review of the Trade and Cooperation Agreement (TCA).
A 10 per cent tariff will hit electric vehicles moving between the UK and the EU once the extension of the TCA grace period expires in 2027, adding thousands of pounds to the cost of a car.
Batteries are the most expensive component of electric vehicles, with manufacturing dominated by China.
Both the UK and the EU used the TCA to try to boost the creation of a European electric car battery industry and rely less on Chinese imports.
But manufacturers are still reliant on Chinese supplies, as EU and British supply chains for EVs are not yet advanced enough for electric cars to meet the rules.
“Unless there’s a huge change in the pattern of where UK and EU car manufacturers are sourcing the batteries from, or the components or critical minerals within EVs, we could be facing another cliff edge for January 2027,” Mr Bain told i.
The TCA provides for tariff-free trade between the UK and EU, but only applies to goods produced in Britain and the bloc.
Under the “rules of origin” agreed in the EU-UK post-Brexit trade deal, EVs need to have 45 per cent EU or UK content from 2024, with a 50-60 per cent requirement for their battery cells and packs, or face British or European Union import tariffs of 10 per cent.
Without the delay on imposing tariffs until 2027, electric vehicles with Chinese made-batteries would have been hit by tariffs that would send the cost of electric cars, which cost on average £50,000, rising by £5,000.
The delay followed a warning from Vauxhall’s parent company Stellantis, which said without it the firm would face crippling tariffs on exports that would leave it unable to make electric vehicles in the UK.
While it was “theoretically” possible that a review of the TCA could resolve the issue permanently over tariffs on batteries, there was a lack of “political will” among Government and Brussels officials to re-examine rules of origin in the trade agreement, Mr Bain said.
“It’s not necessarily the case that the extension of the application of the rules of origin on EVs and batteries is bound up in any operational review of the TCA,” he added.
“It’s an autonomous issue that can be resolved fairly quickly between the UK and the EU, through the existing machinery.”
He said: “I don’t believe that this operational review will lead to the wide scale reinterpretation or reopening of those rules of origin.”
An alternative solution put forward by some EU officials was for the UK to apply to join the Pan-European Mediterranean (PEM) Convention on Rules of Origin.
The pact of more than 20 European, Middle Eastern and North African countries treats goods assembled in one country from parts made in another signatory state as originating in the exporting country in order to avoid tariffs and quotas.
“That’s something that’s potentially negotiable. So that could help, certainly,” said David Henig, UK Director at the European Centre for International Political Economy (ECIPE).
But he added: “I think it’s going to be a while before the UK or European made cars are as competitive as China.”
The European Commission added a clause to the Brexit trade deal making it “legally impossible” for the extension to last any longer than three years.
The UK is the only European country not in the rules of origin zone.
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