Electric car rules could cost carmakers billions in losses

  • by Theo Leggett
  • Business correspondent, BBC News

image Source, getty images

New Brexit trade rules covering electric vehicles could cost European manufacturers £3.75 billion over the next three years, an industry body has said.

The rules are meant to ensure that electric cars produced by the EU are largely made from locally sourced parts.

But manufacturers on both sides of the Channel say they are not ready.

The European Automobile Manufacturers Association (ACEA) also warned that the measures could reduce output from EU factories by up to 480,000 vehicles.

And he said customers will pay the price.

The main problem lies in the so-called “rules of origin” that come into effect in January. They apply to shipments of cars across the Channel under the terms of the Brexit deal, the UK-EU Trade and Cooperation Agreement.

They would effectively ensure that batteries for electric vehicles must be produced in the UK or the EU.

Cars that do not meet the criteria will face a 10% tariff – or taxes – when transported across the Channel, in any direction.

The rules were designed to protect European industry from cheap imports.

But because battery production in Europe has not grown as quickly as expected, carmakers are struggling to meet the new standards.

This is a serious problem for European manufacturers. The UK is by far their biggest export market, with 1.2 million vehicles arriving at UK ports last year. Similarly, more cars made in Britain are transported to the EU than to any other region.

Sharp tariffs could make electric cars more expensive to produce, and potentially drive up prices.

ACEA wants the new rules to be delayed by three years and is appealing to the European Commission to take action.

“Raising consumer prices of European electric vehicles at a time when we need to fight for market share in the face of fierce international competition is not the right move,” said Luca De Meo, Renault’s chief executive. President of ACEA.

“We will effectively hand over a large share of the market to global manufacturers,” he said.

Pushing back the rules would require an agreement to be reached between the UK and the EU.

Britain’s Trade Secretary Kemi Badenoch said last week she was “optimistic” that such a deal could be reached.

But in an interview with the Guardian on Friday, EU Internal Market Commissioner Thierry Breton was much less clear.

He said it would be wrong to reopen the Brexit deal to satisfy the motor industry.

“If something has been discussed then it should not be changed,” he told the newspaper.

image Source, getty images

The European Commission said: “Brexit has, among other things, changed the trade relationship between the UK and the EU.”

It said the Brexit trade agreement – ​​the EU-UK Trade and Cooperation Agreement – ​​“is the result of negotiations in which both parties agreed on the overall balance of commitments”.

It said the rules of origin aim to develop a “robust and resilient battery value chain in the EU”.

ACEA secretary general Sigrid de Vries said it was not surprising that the industry’s appeals were meeting resistance.

“It seems the European Commission doesn’t want to change anything when it comes to Brexit-related topics. It’s very politically sensitive,” he told the BBC.

“We understand that, and we are not asking for any of these arrangements to be changed in any fundamental way.”

Meanwhile Mike Hawes, chief executive of the UK Society of Motor Manufacturers and Traders, told reporters last week that he thought a deal would be reached – but it could be a last-minute affair.

“We are still optimistic that an agreement can be reached. It makes common sense,” he said.

“But I can see it going down, like with Brexit, to Christmas Eve, or something like that.”

EU and UK trade officials are due to meet in London this week. It is not yet known whether new rules will be on the agenda.

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