Car industry pressing EU for further delay to Brexit EV tariffs

The EU and UK automotive sectors have renewed calls for the European Commission to extend the suspension of Brexit tariffs on electric vehicles, warning they cannot meet the 2027 rules of origin requirements. Under the EU-UK Trade and Cooperation Agreement, 70% of a car’s battery pack and 65% of battery cells must be produced in Europe by January 2027 to avoid tariffs, alongside a 55% overall vehicle value threshold. However, industry forecasts now project only around 20% of batteries will be locally manufactured by that deadline, down from an earlier estimate of 60%. Industry representatives blame delays on global supply chain disruptions, including semiconductor shortages exacerbated by Russia’s invasion of Ukraine, as well as China’s dominance in critical raw materials like lithium. The European Automobile Manufacturers’ Association (ACEA) noted that battery production costs in Europe remain 30% higher than in China, making domestic manufacturing uncompetitive. ACEA’s international trade director, Jonathan O’Riordan, stated that the industry’s original 2024 suspension of tariffs was insufficient, as progress on battery production has stalled. The UK’s Society of Motor Manufacturers and Traders (SMMT) echoed these concerns, with CEO Mike Hawes emphasizing that supply chains are still unprepared to meet the strict requirements. He urged the EU and UK to adopt a pragmatic solution to avoid self-defeating tariffs on EVs, which consumers are increasingly being encouraged to purchase. Hawes also stressed the need to safeguard investment in domestic battery capabilities amid broader geopolitical pressures. The European Commission had previously suspended the rules for three years until 2024, but industry leaders argue this was not enough time to build the necessary production infrastructure. Stefan Scherer, CEO of Europe’s only lithium factory, highlighted the financial and temporal challenges, noting that establishing a full lithium production chain can cost up to $750 million and take years. ACEA’s director general, Sigrid de Vries, called for a policy shift to accelerate Europe’s battery development, describing current progress as ‘far too slow.’ Discussions between the EU and UK are ongoing, with both sides emphasizing the need to protect their long-term automotive partnership and maintain Europe’s competitiveness. The car industry’s push for another delay underscores the urgent need to address structural weaknesses in the battery supply chain before tariffs take effect in 2027.