UK-EU New Trade Rule To Support, EV Manufacturers And Consumers

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The United Kingdom government (UK) and European Union (EU) have recently announced their agreement to extended trade rules on electric vehicles (EVs). The move is set to help the manufacturers and consumers save up to £4.3 billion in additional costs. 

This agreement can provide long term certainty for automotive industry and boost electric vehicle sales between the UK and Europe. This decision comes at a time when the government invests over £2 billion to advance domestic battery production and investment in the UK. It is set to help them, increase access to zero tariffs under the Trade and Cooperation Agreement (TCA).

Under this, businesses must prove their products include a minimum level of EU or UK manufactured content. These requirements are known as “Rules of Origin”. It will help them determine where products originate rather than where they’re shipped from to ensure lower tariffs are correctly applied to eligible products and support market competition.

Under the existing Trade and Cooperation Agreement, a staged approach was introduced for electric vehicles and batteries which required phased increases in these rules of origin requirements – with the first increase due to take effect on 1 January 2024, before a final increase from 1 January 2027.

This agreement facilitates UK-EU tariff-free trade in electric vehicles and prevents 10% tariffs being levied on this trade from January. Industry expects this will save car manufacturers and consumers up to £4.3 billion in additional costs and provide long term certainty to the sector as we continue to scale up our domestic battery supply chain and work to deliver our net zero commitments.

Prime Minister Rishi Sunak said, “We have been listening to concerns of the sector throughout this process, and I know this breakthrough will come as a huge relief to the industry. The UK Government is delivering a pragmatic solution to keep costs down for businesses and for people at home who want to make the switch to electric vehicles. We are also leaving no stone unturned to bolster our domestic battery industry and deliver long term certainty for our thriving automotive sector to help them grow their roots in the UK.”

At the “Autumn Statement” the chancellor announced that, “We’re making available £4.5 billion over five years through the Advanced Manufacturing Plan to unlock private investment in strategic manufacturing sectors across the UK. This includes over £2 billion in R&D and capital funding for the automotive sector to support the manufacturing and development of zero emission vehicles, their batteries and supply chain – building on existing support.”

Last month we published the UK’s first ever Battery Strategy, outlining our plan for the UK to attract investment and achieve a globally competitive battery supply chain by 2030. In the strategy, we announced an additional £50 million investment to develop the UK’s battery industry and to secure a resilient UK manufacturing supply chain. The battery sector alone could create 100,000 highly paid and skilled jobs in the UK.

Lisa Brankin, Chair, Ford Britain said, “On behalf of Ford in the UK, I want to thank policymakers in London and Brussels for listening to and engaging with a united automotive industry. Today’s decision to avoid unnecessary tariff costs is a major moment that will protect jobs, support countless investments, and most-importantly help to keep costs down for consumers and businesses on their journey to an all-electric future.”

BMW Group said, “The government has already spent over £2 billion to accelerate the transition to zero emission vehicles, including reducing the upfront cost of electric vehicles and supporting the roll-out of charging infrastructure. There are now over 52,600 public charge points across the UK, a 44% increase since this time last year.”

They add, “Earlier this year, we also published the zero-emission vehicle mandate which will come into effect in 2024, setting out the percentage of new zero emission cars and vans manufacturers will be required to sell each year, starting with a requirement for 22% of new cars sold in 2024 to be zero emission vehicles.”

The mandate ensures the UK has the most ambitious regulatory framework of any country for the switch to electric vehicles, reaching 80% of new cars and 70% of new vans being zero emission by 2030, providing long term certainty and direction for the sector as we set out the pathway to phase out all new diesel and petrol cars and vans by 2035, although some manufacturers already plan to reach 100% sooner.

The UK’s approach has already attracted record investments in gigafactories and electric vehicle manufacturing. This includes the recent announcement of a £2bn Nissan led investment to produce two new electric vehicles in Sunderland, Tata’s investment of over £4 billion in a new 40 GWh gigafactory, BMW’s investment of £600m to build next generation MINI EVs in Oxford, Ford’s investment of £380 million in Halewood to make Electric Drive Units and Stellantis’ £100m investment in Ellesmere Port for EV van production.