European Car Manufacturers Alliance (ACEA) Urges Postponement of New Rules of Origin for Electric Cars

Title: European Car Manufacturers Call for Postponement of Post-Brexit Rules for Electric Cars

Subtitle: Association of European Car Manufacturers (ACEA) Urges Brussels to Extend Deadline for New Rules of Origin

Date: June 20, 2023

Brussels – The Association of European Car Manufacturers (ACEA) has joined forces with the British government to request a three-year postponement of the new rules of origin for electric cars. In a letter addressed to the Brussels authorities, ACEA expressed concerns about the potential damage to the European economy if the rules were implemented as planned in January 2024.

Under the proposed rules, electric cars that do not have at least 45 percent of their value originating from the EU or Great Britain would be subject to import duties of ten percent. This would impact manufacturers from car countries such as Germany, France, Italy, and Spain, as significantly more vehicles are exported from the EU to Great Britain than vice versa.

Acea CEO Sigrid de Vries highlighted the “unfulfillable” nature of the rules of origin and described their introduction in the short term as “counterproductive.” The imposition of tariffs in the most important sales market for European manufacturers would likely lead to a decrease in sales figures for electric cars.

According to estimates by the association, European manufacturers would have to pay British import duties of 4.3 billion euros between 2024 and 2026. This would result in approximately 480,000 fewer electric cars being produced in the EU during this period. De Vries emphasized that these tariffs would burden EU companies unnecessarily during a crucial period of industry upheaval.

The rules of origin for electric cars were agreed upon in the free trade agreement between Great Britain and the EU after Brexit. During the transition period until the end of 2023, manufacturers were expected to establish their own battery infrastructure in Europe. However, Acea argues that the deadline is too short to restructure the global battery supply chain, especially considering the challenges posed by the ongoing energy crisis. Currently, only a tenth of European e-car exports meet the minimum quota of 45 percent of European origin, as most batteries are still sourced from China.

The concerns raised by ACEA and other industry representatives were heard by the European Commission during a meeting in early May. As a result, the German automobile association VDA also increased pressure and warned of the consequences for the German automobile industry. It is now expected that the Commission will grant the requested extension of the transition period.

Failure to extend the deadline would likely benefit Chinese manufacturers, as their share of the British electric car market has already risen from 2% to 32% between 2019 and 2022, despite the existing 10% tariff. If European manufacturers were subjected to the same tariff, they would further lose market share, according to ACEA.

The issue of post-Brexit rules for electric cars has become a competitive disadvantage for European car manufacturers, prompting them to seek a delay in implementation to protect their industry and the European economy.

Source: [1] Reuters – “German carmakers call for post-Brexit rules to be postponed” (URL: https://www.reuters.com/business/autos-transportation/german-carmakers-call-post-brexit-rules-be-postponed-2023-05-18/)

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The European Car Manufacturers Association (ACEA) and the British government have collaborated to request a three-year postponement of the new rules of origin for electric cars. The rules, set to take effect in January 2024, would require electric cars to have at least 45 percent of their value originating from the EU or Great Britain to avoid import duties of ten percent. ACEA and the British government argue that implementing these rules as planned could potentially harm the European economy.

ACEA CEO Sigrid de Vries has emphasized that the rules of origin are “unfulfillable” and believes their introduction in the short term would be “counterproductive.” The imposition of tariffs on electric cars in the European manufacturers’ most important sales market, Great Britain, is likely to result in reduced sales figures for electric vehicles.

According to estimates by ACEA, European manufacturers would face approximately 4.3 billion euros in British import duties between 2024 and 2026 if the rules of origin were implemented. This would lead to a production decrease of around 480,000 electric cars in the EU during the specified time period.

The request for a postponement of the new rules of origin demonstrates the concerns of European car manufacturers about the potential negative impact on their industry. ACEA and the British government argue that allowing for more time to comply with the rules would help prevent economic damage and provide an opportunity for adjustments to be made. The outcome of this request and any potential changes to the implementation timeline remain to be seen.