The United Kingdom’s automotive sector is intensifying pressure on European officials to secure a two-year extension on Brexit-related electric vehicle tariffs. This push comes in response to preliminary European proposals that suggested a significantly shorter reprieve, which industry leaders argue would fail to address long-term production challenges.
Unless a new agreement is reached, a 10% tariff on electric vehicles traded between the UK and the European Union is scheduled to take effect on 1 January. These “rules of origin” mandates, established in the 2020 Christmas Eve Brexit deal, require that vehicle batteries be manufactured using local materials within the UK or EU to qualify for tariff-free trade.
The policy was originally designed to stimulate domestic investment in lithium-ion battery production and reduce reliance on Chinese supply chains. While a deadline extension was previously granted in December 2023, the industry remains heavily dependent on imports from Japan, South Korea, and China as many planned gigafactory projects across the Channel have since collapsed or failed to meet mass-production targets. Encouraging the industry to invest in local lithium-ion battery manufacturing rather than relying on the dominant Chinese battery industry, the rules were initially meant to come into force on 1 January 2024. In 2020, the prospects seemed rosy, but three years later several prominent projects on both sides of the Channel had collapsed. The EU and UK agreed to extend the deadline in December 2023. The topics are likely to form part of an EU-UK summit planned for next week.
Negotiations are currently caught in a broader diplomatic struggle. Discussions are reportedly focusing on whether the UK can access “Made in Europe” subsidies and whether Britain should align with EU-imposed tariffs on Chinese car imports. These complex trade disputes are expected to be central themes at an upcoming EU-UK summit.
The European Commission has shared technical proposals with the automotive industry regarding potential customs adjustments and revised calculation methodologies for origin requirements. However, these documents have not yet been formally presented to the British government, and many industry executives argue that a one-year delay—the length currently under consideration—is insufficient for supply chains to adapt. Which could offer some temporary tariff flexibility, some of the proposals are understood to include adjusting customs procedures and origin calculation methodologies. However, some parts of the UK car industry believe more time is needed for the sector to adapt and for battery gigafactories to churn out enough units. Giga-industrialisation is happening in the EU and UK but it is not producing at the required volume yet.”. According to another person, The negotiations would also focus on the technical details of the proposals, rather than simply aiming for a set time delay.
Industry participants maintain that a two-year minimum delay is essential to avoid repeating this crisis next year, noting that regional battery production is not yet operating at the necessary scale. Meaningful consultation with the UK industry is essential to ensure any solution delivers in practice.”.
The European Automobile Manufacturers Association has warned that the impact would be severe, estimating that 82% of EU electric vehicle exports to the UK would trigger the 10% duty by 2027, creating an additional cost burden of approximately €1.47bn (£1.23bn) in the coming year alone.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, stressed the urgency of the situation. He stated that the UK and EU must urgently agree on pragmatic solutions to avoid causing significant harm to their deeply integrated industries. Hawes emphasized that any resulting agreement must remove the massive tariff liabilities, be logistically workable for manufacturers on both sides, and provide security for ongoing battery investments.
