Electric vehicle rules could cost automakers billions

  • Written by Theo Leggett
  • Business correspondent, BBC News

Image source, Getty Images

New Brexit trade rules covering electric cars could cost European manufacturers £3.75bn over the next three years, an industry body has said.

The rules are intended to ensure that electric cars produced in the EU are made largely from locally sourced parts.

But manufacturers on both sides of the Channel say they are not prepared.

The European Automobile Manufacturers Association (ACEA) also warned that the measures could reduce the production of European Union factories by 480,000 cars.

They said customers would pay the price.

The main problem is the so-called “rules of origin” that come into force in January. It applies to vehicle shipments through the Channel under the terms of the Brexit deal, the UK-EU Trade and Cooperation Agreement.

They will effectively ensure that electric cars will need batteries produced in the UK or EU.

Cars that do not meet the standards will face a 10% customs tariff when transported through the canal in either direction.

The rules are designed to protect European industry from cheap imports.

But because battery production in Europe has not risen as quickly as expected, carmakers are struggling to meet the new standards.

It is a serious problem for European manufacturers. The UK is the largest export market ever, with 1.2 million vehicles arriving at UK ports last year. Likewise, more cars manufactured in the UK are transported to the EU than any other region.

ACEA wants to postpone the new rules for three years, and is appealing to the European Commission to take action.

“Raising consumer prices for European electric vehicles, at the same time when we need to fight for market share in the face of fierce international competition, is not It is the right step.” President of ACEA.

“We will actually hand over part of the market to global manufacturers,” he added.

For the rules to be postponed, an agreement must be reached between the UK and the EU.

British Business Secretary Kimmy Badenoch said last week that she was “optimistic” that such a deal could be reached.

But in an interview with The Guardian on Friday, EU Internal Market Commissioner Thierry Breton was far less frank.

He said it would be a mistake to reopen the Brexit deal to please the car industry.

“If something is negotiated, it should not be changed,” he told the newspaper.

Image source, Getty Images

“Brexit has changed the trading relationship between the UK and the EU, among other things,” the European Commission said.

She noted that the Brexit deal – the trade and cooperation agreement between the EU and the UK – “is the result of negotiations in which both sides agreed to a comprehensive balance of commitments.”

She added that the rules of origin aim to develop a “strong and resilient battery value chain in the EU”.

Sigrid de Vries, Secretary General of ACEA, said it was not surprising that industry requests had met with resistance.

“We understand that, and we are not asking that any of these arrangements be changed in any material way.”

Meanwhile, the chief executive of the UK Society of Motor Manufacturers and Traders, Mike Hawes, told reporters last week that he believed an agreement would be reached – but it may be last minute.

“We are still optimistic that an agreement can be reached. This is logical,” he said.

“But I can see this continuing, like with Brexit, or even on Christmas Eve, or something like that.”

Trade officials from the European Union and the United Kingdom are scheduled to meet this week in London. It is not yet known whether the new rules will be on the agenda.

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