EU and UK Car Industries Advocate for Revised Brexit Trade Deal Amid Electric Vehicle Tariff Concerns
The European Union and United Kingdom automotive sectors are calling upon the European Commission to amend the Brexit trade agreement to again postpone tariffs on electric vehicle imports. The industry fears it cannot fulfill the January 2027 requirements for tariff-free sales due to the stringent rules of origin set by the EU-UK Trade and Cooperation Agreement, effective since 2021.
According to the 2020 Brexit arrangement, 55% of a vehicle’s value must be produced in Europe by January 2027 to qualify for tariff exemptions. Additionally, 70% of the battery pack and 65% of the battery cell should also be manufactured in Europe.
Initially, it was expected that 30% of battery packs and cells would be produced in the EU or UK shortly after the deal, promoting domestic battery manufacturing investments. However, by 2023, it became evident this target was not met, partly due to the COVID-19 pandemic and semiconductor shortages linked to Russia’s Ukraine invasion.
Given the industry’s lobbying, the European Commission temporarily suspended these rules for three years, ending this year. Yet, with the deadline approaching, the industry states it cannot achieve the “made in Europe” battery targets.
Jonathan O’Riordan, international trade director at ACEA, the European Automobile Manufacturers’ Association, noted that the industry had anticipated 60% of batteries across all vehicle segments to be produced in Europe by 2027 when the tariff timeline was initially deferred in 2024. However, he now estimates that by January 2027, “just under 20%” of batteries will be EU-made.
In the UK, the production level is higher but remains below the targets. In Brussels, ACEA’s director general, Sigrid de Vries, remarked that “the battery drive train development in Europe was far too slow,” urging for a “policy shift” from the European Commission to hasten the transition.
Mike Hawes, chief executive of the UK’s Society of Motor Manufacturers and Traders (SMMT), stated: “Battery supply chains are still not ready to meet these stringent requirements, which were based on assumptions that have not materialised despite major investment.” He emphasized the need for a practical solution to prevent tariffs on vehicles consumers are encouraged to purchase while safeguarding domestic battery investment.
Efforts to expand battery production in the EU and UK are not only hindered by China’s dominance over critical raw materials like lithium but also by the high cost of manufacturing, which remains 30% higher than in China, according to O’Riordan.
Although the European Commission has introduced laws to promote production, establishing local industry is expensive and time-consuming. The process from opening a mine to producing battery-grade lithium can take years. “To open up a mine and build a fully fledged production chain – that’s maybe $750m,” noted Stefan Scherer, head of Europe’s sole lithium factory.
Hawes added: “With wider geopolitical pressures and the EU’s ‘Made in Europe’ push adding further strain, both sides must lock in a bilateral commitment that protects our long-term automotive partnership and Europe’s wider competitiveness.”
A European Commission spokesperson stated that “discussions on these and related topics can take place within the framework of ongoing EU-UK negotiations,” noting that the Commission is “in constant contact with stakeholders” in the EV sector to evaluate their readiness to meet the rules of origin.
The industry’s appeals coincide with concerns over Chinese overproduction and favorable exchange rates leading to a series of manufacturing crises and potential erosion of European industry. European leaders are set to meet on 18 June, with China featuring on their agenda.
Original Story at www.theguardian.com