Rishi Sunak, the UK’s Minister for Transport and Infrastructure, has confirmed that the UK is currently in discussions with the EU about Brexit rules which could increase the price of some electric vehicles. This comes after the powerful German automotive industry joined other major carmakers to call for more time.
The VDA, Germany’s largest automotive lobby group, called on Thursday to extend a Brexit deadline by three years in order to prevent a 10% increase in the price of electric vehicles crossing the Channel into the UK.
The Brexit trade agreement between the UK and EU, which was signed at the end 2020, contained “rules” of origin intended to encourage the creation of domestic industries for electric car batteries in order to ensure that the region is not dependent on Asian battery exports. The lack of new factories has led to the possibility that some carmakers will face tariffs on their exports as early as January.
The prime minister said that at the G7 Summit in Japan, he would be willing for the UK to reopen a part of the deal to allow carmakers additional time.
“Not just the UK but car manufacturers all over Europe have expressed concern about this issue.” “We have begun a dialogue with EU officials about ways to address these concerns in the auto industry more broadly.”
VDA stated that “it is urgent” to change the agreement because tariffs will “represent a significant competitive advantage for the European auto industry in comparison to its Asian counterparts on the so-important UK market”. The VDA argued that tariffs would slow the transition to electric vehicles.
VDA members include the most powerful automakers in the world, including BMW, Mercedes-Benz and Porsche. The UK is an important market and profitable for Germany’s automakers, even though it represents a small portion of their total global sales.
The deadline for carmakers was two years ago, but Stellantis, owner of Vauxhall and Fiat, , told a UK Parliamentary committee that it needed more time in order to source its batteries within Europe.
Stellantis , Ford, Jaguar Land Rover, and the European Automobile Manufacturers’ Association publicly called for the extension of the deadline on Wednesday.
According to the rules, all cars exported by the UK or EU must have 40% of the value of their parts sourced from countries in the trade agreement. This percentage will increase to 45% on January 1, 2027, and 55% in 2027.
Batteries are a major part of the price of a vehicle and are imported from China, South Korea, and Japan. Vehicles made in the UK or EU will likely fall outside the regulations.
The VDA requested that the deadline be extended to the end of 2026.
Kemi Badenoch defended the UK government in Parliament on Thursday against Labour’s criticism that its policies could lead to jobs being sent overseas.
She stated that the rules-of-origin problem “doesn’t have anything to do with Brexit” but “with supply chain problems following the pandemic in Russia and Ukraine”. She said the problem with rules of origin “isn’t to do with Brexit” but rather “with supply chain issues following the pandemic and the war in Russia and Ukraine”.
Mike Hawes is the chief executive of a British automotive lobby, the Society of Motor Manufacturers and Traders. He said that the UK-EU Trade and Cooperation Agreement provided the foundation for tariff-free trading and released some pent up investment.
The rules of origin of batteries present a challenge for manufacturers on both sides, as they could face tariffs and increased prices that would discourage consumers from purchasing the vehicles necessary to meet climate change goals.