New figures reveal tariff menace to EU-made battery electrical autos may lead to a £3,400 common value hike if unworkable guidelines of origin are carried out in January
The Society of Motor Producers and Merchants (SMMT) is right this moment urging the EU and UK to strike a direct settlement to keep away from damaging Brexit tariffs on electrified autos. The plea, echoed by the EU auto sector, is to delay the implementation of more durable new Guidelines of Origin (ROO) necessities on batteries which may render EU and UK made electrified autos uncompetitive in every others’ markets.
Because the clock ticks right down to the 1 January 2024 ROO introduction, new calculations lay naked the affect the brand new guidelines, set below the EU-UK Brexit deal, would have on automobile affordability and competitiveness. Electrified autos that don’t meet the brand new thresholds can be topic to a ten% tariff when traded throughout the Channel, leading to a mixed value of £4.3 billion.1 For the buyer, this might imply a median value hike of £3,400 on EU-manufactured battery electrical autos (BEVs) purchased by British patrons, and a £3,600 rise on UK-made BEVs bought in Europe.2
Even towards a backdrop of the pandemic, crippling semiconductor shortages and commerce tensions, EU-UK electrified automobile commerce has greater than doubled lately, enabled by the EU-UK Commerce and Cooperation Settlement (TCA). It has grown 104% within the three years because the TCA was signed, up from £7.4 billion on the finish of 2020 to £15.3 billion final 12 months, though a lot of this uplift has been within the final 12 months.3
The state of affairs has helped whole UK automotive world commerce in completed autos and parts get again on observe following the pandemic, and it’s at present on track to be value greater than £100 billion by the top of 2023, in accordance with the most recent SMMT report, Open Roads – Driving Britain’s world automotive commerce, printed right this moment.
This development is now threatened, nonetheless, as guidelines that have been agreed earlier than the pandemic, battle in Ukraine and provide shortages come into drive in simply 75 days’ time. With virtually half (49.1%) of all new BEVs registered within the UK within the first half of the 12 months coming from the EU, any value improve would act as a barrier to uptake, undermining their competitiveness in an vital and rising market. Moreover, the applying of a ten% tariff on electrified autos alone would undermine shared ambitions to be world leaders in zero emission mobility, holding again markets and undermining the drive to ship internet zero, given street transport stays the largest contributor to general carbon emissions.
Standard petrol and diesel autos would escape tariffs, in the meantime, which might have the perverse impact of incentivising the acquisition of fossil fuel-powered autos. Such a state of affairs wouldn’t solely steer British automobile patrons away from shopping for the very autos wanted to hit internet zero, it may additionally result in a discount in shopper selection if any electrified fashions grow to be uncompetitive within the market in a single day. The problem comes at a vital time, with producers additionally dealing with the UK Zero Emission Car Mandate, which is prone to come into drive on the identical 1 January 2024 date and compel them to promote ever-increasing numbers of zero emission fashions, beginning at 22% subsequent 12 months and rising to 80% by 2030.4
A 3-year delay to the introduction of the stricter guidelines of origin is a practical answer. It will present the required time for EU and UK gigafactories to return on stream in addition to serving to the event of native battery elements and significant mineral provide chains. The postponement can also be one thing that may be readily achieved throughout the current TCA framework, avoiding formal re-negotiation and delivering a lift to EU and UK producers.
Talking forward of a serious SMMT world commerce convention right this moment, Mike Hawes, Chief Government, stated,
UK Automotive is a buying and selling powerhouse delivering billions to the British economic system, exporting autos and elements around the globe, creating excessive worth jobs and driving development nationwide. Our producers have proven unbelievable resilience amid a number of challenges lately, however pointless, unworkable and ill-timed guidelines of origin will solely serve to set again the restoration and disincentivise the very autos we need to promote. Not solely would customers be out of pocket, however the industrial competitiveness of the UK and continental industries can be undermined. A 3-year delay is an easy, commonsense answer which should be agreed urgently.
Launched on the convention, Open Roads – Driving Britain’s world automotive commerce, outlines the vital significance of worldwide commerce to the UK automotive sector with key suggestions to guarantee development, jobs and prosperity within the coming years, together with:
- Modernisation of present continuity agreements mixed with the negotiation of recent FTAs setting real looking content material necessities for batteries and associated parts.
- The renewal of agreements with South Korea, Mexico and Canada in addition to negotiations with India and the Gulf Cooperation Council may supply enhanced market entry and commercially significant alternatives.
- With few exceptions, worldwide commerce diplomacy is shifting its focus from conventional FTA negotiations to different priorities, together with trade-related funding measures, stage enjoying subject devices and new company sustainability obligations – these should be thought of in future negotiations.
- Strengthening the UK and broader European provide chain for batteries and significant uncooked and refined minerals and embedding recycling and remanufacturing as a part of a sustainable and resilient automotive enterprise mannequin.
- Regulatory challenges and taxation can drastically cut back market entry and even offset FTA advantages, with producers of luxurious and sports activities autos significantly uncovered to non-tariff boundaries and behind the border measures. This should even be thought of in all future commerce offers.
1: Protecting all electrified automobiles, BEV, PHEV and HEV, and by way of SMMT member survey.
2: SMMT calculations overlaying BEVs (automobiles) solely. The ten% tariff applies to the manufacturing facility gate value of the automobile. Import prices primarily based on JATO general market common value, export worth primarily based on SMMT personal estimates.
3: SMMT calculations – Open Roads – Driving Britain’s world automotive commerce
4: UK Authorities – https://www.gov.uk/authorities/information/government-sets-out-path-to-zero-emission-vehicles-by-2035