EU-UK Agreement on Electric Vehicle Tariffs and Battery Production

The European Commission has closed a crucial agreement with the United Kingdom to extend the current rules of origin regime for electric vehicles until the end of 2026. This crucial agreement for the industry will avoid the imposition of 10% tariffs on trade of electric vehicles between both parties, and will help ensure that the final price does not rise.

As part of the agreement, the European Commission has announced that will allocate up to 3 billion additional euros to the industrywith the double objective of facilitating the adaptation of manufacturers to more demanding battery regulations and of increasing the production of batteries for electric cars in the European Union during this period.

How EU-UK trade regulations affect the industry

This fact sheet looks at the 🚗 🚛 trade between the 🇪🇺 🇬🇧 and zooms in on the UK battery-electric car market.

🤝 20% of EU vehicle exports go to the UK
🔋 1 out of 10 EU-made cars exported to the UK are battery electric

DISCOVER: pic.twitter.com/VUYSKF7RbY

— ACEA (@ACEA_auto) December 25, 2023

From the European employers’ association ACEA, they had been demanding for some time this extension of the Trade and Cooperation Agreement between the United Kingdom and the EU (ACC), adopted after Brexit, in order to strengthen the European industry, as well as trade between the EU and the United Kingdom, since currently “one in ten cars made in the EU and exported to the UK “They are battery electric.”

In essence, this agreement aims to achieve a gradual decrease in dependence on batteries that come from China, a country that currently controls the supply chain of this essential component for electric cars. Thus, starting in 2027, batteries will necessarily be manufactured in the Old Continent to prevent trade in electric cars between both parties from being taxed with a 10% tariff.

This agreement is aligned with the “Battery Alliance”, an initiative aimed at creating a complete, globally competitive and sustainable value chain in the EU which seeks to guarantee strategic autonomy in a fundamental sector for the ecological and digital transition of the European economy.

Under the agreement reached, this objective is not modified, but it does allow manufacturers more room to adapt and reach the goal of the batteries in their electric cars (and part of their components) originating in the EU.

In this sense, the European Commission has announced that it will support the measure with around 3 billion euros over the next three years, charged to the Innovation Fund, while the extension will be complemented by a blocking mechanism that ensures that from 2027 to 2032 no other changes can be made in the original agreement.

“The battery producing sector It is strategic for the EU’s decarbonization plans and of Spain,” highlights the Secretary of State for Commerce, Xiana Méndez, who also points out that “we want rules of origin to be maintained for electric vehicles that prioritize the use of batteries manufactured in the EU.”

According to the general director of ACEA, Sigrid de Vries, this agreement is the recognition of a request that manufacturers have been making, who defend that “it takes time to create emerging value chains” and with this extension “a payment to customs will be avoided of around 4.3 billion euros between 2024 and 2026 and the production of up to 480,000 fewer electric vehicles”.

From the employers’ association, they hope that this will improve the competitiveness of a critical industry for Europe, and in the process, potential buyers will not be affected.

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2023-12-26 10:18:19
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