- By Theo Leggett
- Business Correspondent, BBC News
1 hour ago
Image source: Getty Images
New Brexit trading rules for electric vehicles could cost European manufacturers £3.75 billion over the next three years, an industry body has said.
The rules are intended to ensure that electric cars produced in the EU are largely made from locally sourced parts.
But manufacturers on both sides of the Channel say they are not ready yet.
The Association of European Automobile Manufacturers (ACEA) also warned that the measures could reduce production by EU factories by 480,000 vehicles.
And they said customers would pay the price.
The main problem lies in the so-called “rules of origin”, which come into force in January. They apply to car transport across the English Channel under the Brexit Agreement, the Trade and Cooperation Agreement between the UK and the EU.
They will effectively require electric vehicle batteries to be manufactured in either the UK or the EU.
Cars that don’t meet the criteria will face duties – or taxes – of 10% in both directions when transported across the English Channel.
The rules were intended to protect European industry from cheap imports.
However, as battery production in Europe has not ramped up as quickly as expected, car manufacturers are struggling to meet the new criteria.
It is a serious problem for European manufacturers. The UK is by far the largest export market, with 1.2 million vehicles arriving at UK ports last year. Likewise, more UK-built cars are transported to the EU than any other region.
High tariffs could make the production of electric cars more expensive and potentially drive up prices.
ACEA wants the new rules to be delayed for three years and is calling on the European Commission to take action.
“Increasing consumer prices for European electric vehicles, especially at a time when we have to fight for market share in tough international competition, is not the right step,” said Renault boss Luca de Meo, who also serves as managing director of ACEA -President.
“We will effectively give up some of the market to global manufacturers,” he added.
For the rules to be rolled back, an agreement would have to be reached between the UK and the EU.
British Business Secretary Kemi Badenoch said last week she was “optimistic” such an agreement could be reached.
But in an interview with the Guardian on Friday, EU Internal Market Commissioner Thierry Breton was significantly less forthcoming.
He said it would be wrong to reopen the Brexit deal to satisfy the car industry.
“If something has been negotiated, it should not be changed,” he told the newspaper.
Image source: Getty Images
The European Commission said: “Brexit has, among other things, changed the trading relationship between the UK and the EU.”
It noted that the Brexit trade deal – the trade and cooperation agreement between the EU and the UK – “is the result of a negotiation in which both sides agreed on an overall balance of commitments”.
It added that the rules of origin aim to develop a “strong and resilient battery value chain in the EU”.
Sigrid de Vries, ACEA’s secretary general, said it was not surprising that the industry’s appeals were met with resistance.
“The European Commission apparently doesn’t want to change anything when it comes to Brexit issues. It’s very politically sensitive,” she told the BBC.
“We understand this and are not calling for any fundamental changes to these agreements.”
Meanwhile, Mike Hawes, chief executive of Britain’s Society of Motor Manufacturers and Traders, told reporters last week he expected a deal to be struck – but it could be a last-minute affair.
“We are still optimistic that an agreement can be reached. That makes common sense,” he said.
“But I can imagine this will continue until Christmas Eve or so, like Brexit.”
EU and UK trade representatives are due to meet in London this week. It is not yet known whether the new rules will be on the agenda.