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EU Exports of Electric Cars to UK Put at Risk by Brexit Trade Deal

EU exports of electric cars to the UK worth €30bn a year will be put at risk unless the Brexit trade deal is tweaked, representatives of the sector in Brussels have said.

Three of the world’s biggest car manufacturers have already called on the British government to open talks over new rules that will see 10% tariffs put on exports to the EU, if 45% of an electric vehicle by value does not originate in the EU or the UK.

The European Automobile Manufacturers’ Association (ACEA) has now quantified the risk to manufacturers who ship in the other direction, saying it could add more than €3bn in costs to the EU industry.

Exports of ACEA members’ electric vehicles to the UK were valued at about €4.3bn in 2022 but with a recovery in supply chain and the move away from combustion engines, the market is projected to boom. ACEA represents 75% of the auto industry in the EU.

“We would expect total sales to be around €25bn to €30bn by 2026,” said Jonathan O’Riordan, ACEA’s international trade director. A tariff of 10% would add costs of up to €3bn passed on to the consumer, absorbed by the industry or a mixture of both, he added.

It would mean electric vehicles imported from the EU, already considered prohibitively expensive by many, would cost even more next year. The EU introduced the rule of origin to help boost the fledgling electric car trade.

China still dominates the supply of chemicals, which consist of up to 45% of the cost of an electric vehicle, say ACEA.

Last month, the multinational car giant Stellantis, which is responsible for 14 brands including Vauxhall and Jeep, warned it might have to close operations in Britain with the loss of thousands of jobs if the new rule of origin came into force in January.

A central issue is a lack of understanding of how much of an electric car’s cost emanates from the refinement and processing of chemicals in batteries, a process dominated by China, says ACEA.

O’Riordan said China was the global supplier of “refined” active materials in batteries including nickel and manganese and cobalt oxide.

“The problem is the battery is such a high-value component of an electric vehicle. With passenger cars, between 35% and 45% of the cost is … the battery. If we are talking a heavy duty truck it is between 45% and 50%,” said O’Riordan.

ACEA formally wrote to the commission mapping out the costs, arguing it needed another three years for Europe to scale up not only battery supply but chemical refinement, which is critical to the process.

At the moment, the trade deal merely requires that the battery cell be assembled in Europe but from next year the parts including the cathode material must also originate in Europe, including the UK, which ACEA says is impossible.

“We are not saying the rules should not be restrictive. We’re just saying we are not in a position to go too restrictive right now. Give us a bridging mechanism for the next three years,” said O’Riordan.

Earlier this month, the European commission vice president, Maroš Šefčovič, said the UK could join the pan-European Mediterranean agreement, which allows parts made in one country but assembled in another to be treated as one export source.

“It is a non-starter. It might be a long term solution but it is not the solution for the next three years,” said O’Riordan. He said the Mediterranean agreement did not get round the fact that China was the dominant supplier of refined chemicals.

The continued battle to tweak the trade deal in relation to the auto sector comes days after Šefčovič dashed hopes that the trade deal would be reviewed before 2026.

This was echoed by Stefan Fuehring, one of the most senior EU officials in the trade negotiations, who warned amending the trade deal even in 2025 was “a long shot”, pointing out the review clauses concerned “implementation” of the deal and nothing more.

A spokesperson for the EU said it had “taken note” of ACEA’s estimates.

One diplomat said the European commission was “just one voice” in this and its job was to be “inflexible” and “protect agreements”.

“As we have seen before if there is political will things can be changed,” they said.

Source: The Guardian



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