The UK and EU have agreed to extend trade rules on electric vehicles (EVs) until the end of 2026 to keep costs down for manufacturers and consumers. This decision was made to provide long-term certainty for the automotive industry and boost electric vehicle sales. The existing rules of origin will last for a further three years until the end of 2026. With this, it will avoid a 10% tariff on car sales between the UK and the EU. This agreement facilitates UK-EU tariff-free trade in electric vehicles and prevents a tariff cliff-edge that would have occurred in just 26 days.
According to the British government, the extension from the prior 2024 deadline would save manufacturers and consumers up to 4.3 billion pounds ($5.45 billion) in additional expenditures. Britain and the EU are each other’s major markets for EV exports, which are being promoted as a low-carbon alternative to internal combustion engine vehicles fuelled by petrol or diesel.
Background
The UK-EU Trade and Cooperation Agreement (TCA) temporarily exempted electric vehicles (EVs) from the rules that said products must be sourced from within the UK or EU. These tariff exemptions were agreed as part of the Brexit deal and were due to end on January 1, 2024. The Society of Motor Manufacturers and Traders (SMMT) warned that battery electric vehicles (BEVs) would have been subject to a 10% tariff if the rules had been applied in 2024, adding billions of pounds and pushing up prices for consumers.
Benefits of the Extension
The extension of trade rules on electric vehicles is a win for motorists, the economy, and the environment. Maintaining tariff-free trade in EVs will ensure consumers retain the widest and most affordable options at a time when we need all drivers to make the switch. The agreement also demonstrates the importance of updating the UK-Turkey battery trade rules to reflect today’s agreement.
Earlier this month, the proposal for the timeline extension was released by the EU. However, the EU Council only gave its approval on Thursday after the presentation of the proposal. British Prime Minister Rishi Sunak said in a statement
“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 … 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.”
Car brands warned about the law
One of the world’s largest carmakers, Stellantis, the owner of Fiat had earlier warned about the new rules. The company warned that British car plants could close up if the rules take effect in 2024. In addition to Stellantis, many other brands in the industry had similar concerns. A trade association for the UK motor industry lauded the extension of the trade rules.
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Mike Hawes, the head of the London-based Society of Motor Manufacturers and Traders (SMMT) industry body, said.
“Deferring the rules of origin is a win for motorists, the economy and the environment … The measure will help cut carbon, support growth and jobs, and is the right decision for the decarbonisation of road transport.”
The government also claims that Britain will look to agree a three-year extension to the equivalent rules with Turkey to support UK car companies who are major exporters to the Turkish market.
Challenges and Future Changes
The extension of trade rules on electric vehicles is a step in the right direction. However, there are still changes to come in the future. The EU’s Brexit commissioner had initially opposed such a move. This suggests that there may be further adjustments to the rules as the situation evolves. The SMMT has welcomed the agreement and emphasized the need for governments to continue listening to the sector and acting to safeguard the competitiveness of the EU and the UK.
As EV sales ramp up, the supply of sufficient batteries from European plants will be a significant industrial challenge for the automotive industry. The UK government has announced an additional £50 million investment to develop the UK’s battery industry and secure the battery sector. This sector could create 100,000 highly paid and skilled jobs in the UK
While the current agreement extends trade rules until the end of 2026, there may be further adjustments to the rules as the situation evolves. The EU’s Brexit commissioner had initially opposed the extension of trade rules, and there may be changes in the future depending on the progress of the UK’s battery industry and the global supply chain. Governments have listened to the sector and acted to safeguard the competitiveness of the EU and UK. It has also provided the much-needed certainty for the automotive industry
Conclusion
The UK and EU have taken a significant step towards avoiding tariffs on electric vehicles. It did this by extending trade rules until the end of 2026. This decision will help keep costs down for manufacturers and consumers. It will also provide long-term certainty for the automotive industry and boost electric vehicle sales. The agreement demonstrates the importance of collaboration between the UK and the EU. They can address the challenges of the global supply chain and support the transition to a more sustainable future.
Author Bio
Efe Udin is a seasoned tech writer with over seven years of experience. He covers a wide range of topics in the tech industry from industry politics to mobile phone performance. From mobile phones to tablets, Efe has also kept a keen eye on the latest advancements and trends. He provides insightful analysis and reviews to inform and educate readers. Efe is very passionate about tech and covers interesting stories as well as offers solutions where possible.