Senior officials in Brussels are suggesting that the UK should become part of a pan-European agreement on goods trade to limit the damage caused by post-Brexit tariffs to its car industry, instead of seeking a delay in their introduction.
As per the "rules of origin" terms outlined in their post-Brexit trading agreement, electric vehicles transported between the UK and the EU will require at least 45% of their parts to be sourced from within the two regions from January next year, or face 10% tariffs. The limit increases to 60% for batteries, which constitute a significant portion of an EV's value and are still mainly imported from China, South Korea, or Japan.
London is requesting the EU to postpone the introduction of the levy until 2027, a move supported by UK and EU car manufacturers who have cautioned that they will be unable to comply with the "rules of origin" starting next year due to the lack of battery production capacity in Europe. The commission views the upcoming shift in rules of origin requirements as a means to encourage EU car manufacturers to invest in battery production facilities in the region, partially at the expense of the UK industry, which has had difficulty attracting investment in the sector.
While the UK's membership in PEM could eventually assist European car manufacturers as signatory nations like Norway and Turkey establish a domestic EV battery manufacturing industry, trade experts cautioned that it would do little in the short term to address the UK-EU tariff issue since there is still a need to import batteries from Asia.