EV tariffs avoided as UK and EU agree to extend current rules of origin

Posted on 21 Dec 2023 by James Devonshire

Tariffs on electric vehicles (EVs) due to come into effect next year will be avoided after the UK and EU agreed to extend trade rules.

Prime Minister Rishi Sunak announced the news today, saying existing regulations will now run until the end of 2026.

Rules of origin requirements, which state that an EV must include a minimum level of EU or UK manufactured content, were due to take effect from January 1, 2024. Under the proposed rules, tariffs of 10% would have been imposed on car sales between the UK and the EU if the vehicle did not meet the local content requirements.

Industry expects this will save car manufacturers and consumers up to £4.3bn in additional costs and provide long term certainty to the sector as the UK continues to scale up its domestic battery supply chain and works to deliver net zero commitments.

Prime Minister Rishi Sunak said: “We have been listening to concerns of the sector throughout this process, and I know this breakthrough will come as a huge relief to the industry.

“The UK Government is delivering a pragmatic solution to keep costs down for businesses and for people at home who want to make the switch to electric vehicles.

“We are also leaving no stone unturned to bolster our domestic battery industry and deliver long term certainty for our thriving automotive sector to help them grow their roots in the UK.”

Commenting on the announcement, Mike Hawes, SMMT Chief Executive, said: “Deferring the rules of origin is a win for motorists, the economy and the environment. Maintaining tariff-free trade in EVs will ensure consumers retain the widest and most affordable choice of models, at a time when we need all drivers to make the switch.

“Governments have listened to the sector and acted to safeguard the competitiveness of the EU and UK automotive industries and give the Anglo-European battery industry the critical time it needs to catch up. The measure will help cut carbon, support growth and jobs, and is the right decision for the decarbonisation of road transport.”

Lisa Brankin, Chair, Ford Britain, said: “On behalf of Ford in the UK, I want to thank policymakers in London and Brussels for listening to and engaging with a united automotive industry. Today’s decision to avoid unnecessary tariff costs is a major moment that will protect jobs, support countless investments, and most-importantly help to keep costs down for consumers and businesses on their journey to an all-electric future.

“The Government’s focus on updating the UK-Turkey battery trade rules to reflect today’s agreement with the EU is also very welcome. Our dedicated Ford Pro organisation is committed to helping businesses go electric and this swift action will help us to continue do that.”

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