EU electric vehicle industry faces €4.3 billion tariff cost amidst post-Brexit challenges

The European electric vehicle (EV) industry is currently facing a storm due to post-Brexit regulations that require them to source more EV components from the UK or the EU.

The European Automobile Manufacturers' Association (ACEA) says that the resulting tariffs to the UK government could be as high as 4.3 billion euros ($4.7 billion), spread over three years. This is in addition to a decline in the output for the automakers in the block.

The EU-UK trade deal requires EVs to have an EU or UK content of at least 45% starting in 2024. The requirement for battery cells and packs is higher at 50-60%. Failure to meet these criteria would result in import tariffs of 10%.

ACEA is calling for for a three-year postponement of these rules, citing the need to develop Europe's battery capacity, as automakers currently depend on imported battery cells and materials from Asia.

ACEA estimates that European manufacturers could face 4.3 billion euros in tariffs over three years under the new rules. As the UK accounts for nearly a quarter of EU EV exports, this could lead to a potential reduction in EU production by up to 480,000 units.

In response, ACEA has urged the European Commission to review the rules of origin for batteries and negotiate a three-year postponement with the UK. They anticipate that only 10% of EVs will comply with the new regulations by 2024, leaving EU producers at a competitive disadvantage against rivals from China and other third countries.

The warning echoes concerns raised by automaker Stellantis, which highlighted the potential closure of British car plants without swift renegotiations of the Brexit deal.

While the European Commission views these rules as crucial for fostering a robust battery value chain within the EU, it acknowledges that the trading relationship with Britain has changed post-Brexit.

However, the Commission, represented by Stefan Fuehring, a trade agreement official, stated that EU rules of origin remain "fit for purpose" and that there are no plans to alter them.

The EV industry in Europe now faces a crucial period as stakeholders grapple with the impact of tariffs, the need for battery capacity development, and the evolving landscape of post-Brexit trade relations.