The United Kingdom’s automotive sector is intensifying its efforts to secure a two-year extension on pending Brexit-related tariffs affecting electric vehicle trade with the European Union. These so-called “rules of origin” requirements for batteries are scheduled to take effect on 1 January, potentially imposing a 10% customs duty on most electric cars traded across the channel unless a new diplomatic agreement is reached. Tariffs are due to kick in on 1 January for the majority of electric cars traded between the EU and UK unless the two sides can come to an agreement to delay for a second time the implementation of “rules of origin” on batteries. Which was rushed through on Christmas Eve in 2020, included a clause that British and European electric cars would have to use batteries made in either the UK or the EU with local materials, or face 10% tariffs, the Brexit deal. Encouraging the industry to invest in local lithium-ion battery manufacturing rather than relying on the dominant Chinese battery industry, the rules were initially meant to come into force on 1 January 2024. Carmakers in the UK and Europe are united in their calls for the introduction of the rules of origin to be delayed again. However, some parts of the UK car industry believe more time is needed for the sector to adapt and for battery gigafactories to churn out enough units.
Originating from the 2020 post-Brexit trade agreement, the rules mandate that electric vehicles must utilize batteries produced within the UK or EU using local materials to avoid these penalties.
While originally designed to bolster regional battery manufacturing and reduce dependence on dominant Chinese supply chains, the landscape has shifted significantly since 2020. Several major industrial projects have stalled, and local production capacity has yet to reach the volume required to meet current market demand. In 2020, the prospects seemed rosy, but three years later several prominent projects on both sides of the Channel had collapsed. The EU and UK agreed to extend the deadline in December 2023.
Industry leaders argue that a longer transition period is necessary to allow for the maturation of domestic “gigafactories.” One UK automotive executive emphasized that anything less than a two-year delay would likely result in the same impasse next year, noting that current regional output remains insufficient to replace reliance on imports from Japan, South Korea, and China. The topics are likely to form part of an EU-UK summit planned for next week.
The negotiations are further complicated by broader disagreements, including the inclusion of Britain in “Made in Europe” subsidy frameworks and potential alignment on EU tariffs regarding Chinese car imports. While the European Commission has circulated internal proposals for a shorter, one-year delay—potentially involving technical adjustments to customs calculation methods—these have not been formally presented to the UK government. Which could offer some temporary tariff flexibility, some of the proposals are understood to include adjusting customs procedures and origin calculation methodologies.
The European Automobile Manufacturers Association has underscored the economic stakes, estimating that 82% of EU electric vehicle exports to the UK would trigger the 10% tariff in 2027 under current rules. Such a scenario would impose an estimated financial burden of €1.47bn (£1.23bn) on the industry in the coming year alone.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), called for an urgent, pragmatic resolution to protect the deeply integrated industry. Hawes stressed that any successful deal must eliminate the significant tariff liabilities for vehicles traded from the start of January, remain operationally viable for manufacturers, and safeguard ongoing investments in battery production. Meaningful consultation with the UK industry is essential to ensure any solution delivers in practice.”.
As both sides prepare for an upcoming summit, industry participants are pushing for a focus on practical technical solutions rather than purely symbolic extensions. They contend that clear, long-term regulatory certainty is vital to preventing severe damage to the European automotive supply chain and ensuring the viability of future electrification efforts.
