Car manufacturers have expressed concerns about the impact of changes in trade relations with the UK that will come into effect on January 1, 2024. These changes are part of the Trade and Cooperation Agreement signed by the EU and the United Kingdom after Brexit. The agreement states that goods exported from the EU to the UK must meet certain “origin” requirements to avoid paying duties. From 2024, the conditions for exporting electric vehicles will become stricter, requiring that the batteries, components, and critical materials be produced in the EU or the UK.
This new regulation is designed to encourage investment in green technologies, but car manufacturers are worried about the potential consequences. Until now, trade was allowed without tariffs if the batteries were assembled in Europe, even if their components were manufactured abroad. However, the introduction of export tariffs of 10% from January 1, 2024, could cost companies around €4.3 billion between 2024 and 2026, according to industry estimates. This is seen as a significant blow to the sector and the European economy.
The United Kingdom is the main market for EU manufacturers, with 1,090,261 vehicles exported in 2022, accounting for almost 20% of the market share. In terms of electric vehicles, the share was 47%. However, Chinese electric vehicles have already captured a third of the UK market, despite the tariffs. If European manufacturers are forced to pay the same tariffs, they fear losing ground.
In response to these concerns, the Director General of the European Association of Automobile Manufacturers (ACEA), Sigrid de Vries, has petitioned the European Commission to delay the entry into force of these new conditions. De Vries argues that while the intention is to boost battery manufacturing in Europe, the continent has yet to establish a safe and reliable battery supply chain that can meet the more stringent rules. The application of these rules could have serious consequences for the electric vehicle industry in Europe, just when production and sales should be accelerated.
The report also highlights that this situation could lead to a reduction in the production of electric vehicles by about 480,000 units between 2024 and 2026. The association warns that factories could be forced to reduce their production by an amount equivalent to two factories. The supply chain for electric vehicle components and raw materials is still controlled by China, and ACEA acknowledges that vehicle manufacturers currently rely on battery cells or materials imported from Asia.
Overall, the car manufacturers are calling for a delay in the implementation of these new conditions to allow for the development of the required capacity and to avoid significant losses in the production of electric vehicles in Europe. They argue that the current rules of origin are unattainable and describe the proposed tariffs as massive and unnecessary. ACEA represents major car manufacturers such as the Volkswagen Group, Renault, and BMW.
uk and eu relationship after brexit
Anufacturers, and any changes in trade relations with the UK have a significant impact on the automotive industry. As part of the Trade and Cooperation Agreement signed between the EU and the UK after Brexit, there will be changes in the “origin” requirements for goods exported from the EU to the UK, starting from January 1, 2024.
Under the new regulations, exporting electric vehicles to the UK will become more stringent. Batteries, components, and critical materials used in electric vehicles must be produced either in the EU or the UK to avoid paying duties. This is aimed at promoting investment in green technologies, but car manufacturers have expressed concerns about the potential consequences.
Previously, trade was allowed without tariffs if the batteries were assembled in Europe, even if their components were manufactured elsewhere. However, starting from January 1, 2024, there will be export tariffs of 10% on electric vehicles that do not meet the new origin requirements. Industry estimates suggest that this could result in a cost of around €4.3 billion for car manufacturers between 2024 and 2026.
The introduction of these export tariffs is seen as a significant blow to the automotive sector and the European economy as a whole. The United Kingdom is the main market for EU manufacturers, and any disruptions in trade relations could have adverse effects on their business operations.
In summary, the upcoming changes in trade relations between the EU and the UK, set to take effect on January 1, 2024, will tighten the origin requirements for electric vehicles exported from the EU to the UK. This has raised concerns among car manufacturers, who fear the potential financial impact of the new regulations and the potential disruption to the automotive sector.
The potential impact of new trade relations on the UK’s car manufacturers is a cause for concern. With uncertainty surrounding tariffs and access to key markets, it is crucial for the government to prioritize securing favorable trade agreements to safeguard this vital sector.
The potential impact of new trade relations on the UK’s car manufacturers cannot be underestimated. Uncertainty looms as they face potential disruptions to supply chains, increased costs, and decreased market access. Strategic planning and government support will be crucial in mitigating these challenges and maintaining the competitiveness of the industry.