Brussels agrees to last minute reprieve on UK-EU EV tariffs

The UK and the EU have reached a deal that will delay the implementation of 'rules of origin' and the imposition of tariffs on electric vehicles (EVs).

The European Commission has confirmed that it had agreed to a three-year postponement of the new trading arrangement scheduled to take effect from January. 

Under the original rules, the Society of Motor Manufacturers and Traders (SMMT) had predicted a 10% tariff on EVs traded in both directions would result in billions in costs, increased consumer prices, and diminished competitiveness for manufacturers in each other's markets - a potential setback could significantly impede the transition to zero-emission mobility.

The UK-EU Trade and Cooperation Agreement (TCA) initially exempted electric vehicles (EVs) from rules requiring products to be substantially made in either Britain or the bloc to qualify for the EU's zero tariff, zero quota regime, due to the predominant importation of EV batteries from Asia. These tariff exemptions, part of the Brexit deal, were set to expire on January 1, 2024.

Under the more stringent rules, the only way to avoid tariffs would be to source all battery parts and certain critical battery materials in the EU/UK, a goal deemed practically unattainable by manufacturers at present. Despite substantial investments in EV production in both the UK and EU, local battery supply needs more time to meet growing demand.

The SMMT, along with its EU counterparts, has consistently warned about the industry's vulnerability to stricter locally sourced content requirements if applied from 2024. It argued that a three-year extension would prevent a tariff crisis, allowing the UK and EU automotive industries to continue selling EVs in each other's markets without penalties.

Responding to the potential delay to post-Brexit tariffs on EVs, Paul Barker of Carwow UK, said: “If confirmed, this news will come as a big relief to manufacturers and motorists alike. The end-of-year cliff-edge would have impacted the EV transition both in the UK and EU, with steep tariffs affecting car buyers as well as carmakers, who rely heavily on cross-border sales. The fact remains that most EVs still rely on materials sourced from Asia, particularly batteries, so this extension means common sense has prevailed.”