A trade association warned on Wednesday that if Britain and the EU do not delay the implementation of post-Brexit trade regulations mandating local content in electric vehicles traded between the two entities, the average prices of cars manufactured in the EU will surge by £3,400 (equivalent to $4,134) in January. The Society of Motor Manufacturers and Traders (SMMT) also disclosed that these regulations would result in an additional £3,600 cost for the average UK electric vehicle sold in Europe.
Mike Hawes, the CEO of SMMT, expressed concern about the repercussions, stating, “Not only would consumers have less disposable income, but the competitive edge of both British and continental industries would also be compromised.”
These regulations, known as “origin rules,” were established in the post-Brexit trade agreement between the EU and the UK. Starting in 2024, electric vehicles are required to have a 45% local content, with a 50%-60% requirement for their battery cells and packages, or else they would be subject to 10% import tariffs in the UK or Europe.
However, the existing supply chains in both the UK and Europe for electric vehicles are not yet sufficiently developed to meet these regulations, placing car manufacturers at risk of incurring the 10% tariff.
Stellantis, the world’s third-largest automaker, has warned that British car factories may close, resulting in the loss of thousands of jobs, unless the Brexit agreement is renegotiated promptly. Ford has also indicated that it will slow down its transition to electric vehicles.
Automakers and industry associations, including SMMT, have advocated for a three-year postponement of the implementation of the origin rules.
The European Automobile Manufacturers Association (ACEA) has estimated that these regulations could lead to tariffs costing car manufacturers up to €4.3 billion (approximately $4.53 billion) and impact production.
Up to now, the EU’s governing body has shown reluctance to reopen discussions on the agreement. In June, Stefan Fuehring, a European Commission official responsible for overseeing the post-Brexit trade agreement between the EU and the UK, affirmed that the EU’s origin rules remained “appropriate” and that there was no consideration of altering them.
