The Society of Motor Producers and Merchants (SMMT) is as we speak urging the EU and UK to strike a direct settlement to keep away from damaging Brexit tariffs on electrified automobiles. The plea, echoed by the EU auto sector, is to delay the implementation of harder new Guidelines of Origin (ROO) necessities on batteries which might render EU and UK made electrified automobiles uncompetitive in every others’ markets.

Because the clock ticks all the way down to the 1 January 2024 ROO introduction, new calculations lay naked the affect the brand new guidelines, set underneath the EU-UK Brexit deal, would have on automobile affordability and competitiveness. Electrified automobiles that don’t meet the brand new thresholds can be topic to a ten% tariff when traded throughout the Channel, leading to a mixed price of £4.3 billion.¹ For the patron, this might imply a median value hike of £3,400 on EU-manufactured battery electrical automobiles (BEVs) purchased by British consumers, 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 just 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 yr, though a lot of this uplift has been within the final 12 months.³

The scenario has helped complete UK automotive international commerce in completed automobiles and elements get again on monitor following the pandemic, and it’s presently on target to be price greater than £100 billion by the tip of 2023, in response to the most recent SMMT report, Open Roads – Driving Britain’s international automotive commerce, printed as we speak.

This development is now threatened, nevertheless, as guidelines that have been agreed earlier than the pandemic, conflict 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 yr coming from the EU, any price 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 automobiles alone would undermine shared ambitions to be international leaders in zero emission mobility, holding again markets and undermining the drive to ship internet zero, given highway transport stays the largest contributor to general carbon emissions.

Standard petrol and diesel automobiles would escape tariffs, in the meantime, which might have the perverse impact of incentivising the acquisition of fossil fuel-powered automobiles. Such a state of affairs wouldn’t solely steer British automotive consumers away from shopping for the very automobiles wanted to hit internet zero, it might additionally result in a discount in client alternative if any electrified fashions turn out 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 Automobile 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 yr and rising to 80% by 2030.⁴

A 3-year delay to the introduction of the stricter guidelines of origin is a practical resolution. It could 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 demanding mineral provide chains. The postponement can 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 international commerce convention as we speak, Mike Hawes, Chief Government, stated,

UK Automotive is a buying and selling powerhouse delivering billions to the British economic system, exporting automobiles and elements world wide, creating excessive worth jobs and driving development nationwide. Our producers have proven unimaginable resilience amid a number of challenges in recent times, however pointless, unworkable and ill-timed guidelines of origin will solely serve to set again the restoration and disincentivise the very automobiles we need to promote. Not solely would customers be out of pocket, however the industrial competitiveness of the UK and continental industries could be undermined. A 3-year delay is a straightforward, commonsense resolution which should be agreed urgently.

Launched on the convention, Open Roads – Driving Britain’s international automotive commerce, outlines the important significance of worldwide commerce to the UK automotive sector with key suggestions to guarantee development, jobs and prosperity within the coming years, together with:

1. Modernisation of present continuity agreements mixed with the negotiation of latest FTAs setting sensible content material necessities for batteries and associated elements.
2. The renewal of agreements with South Korea, Mexico and Canada in addition to negotiations with India and the Gulf Cooperation Council might supply enhanced market entry and commercially significant alternatives.
3. 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 area devices and new company sustainability obligations – these should be thought of in future negotiations.
4. Strengthening the UK and broader European provide chain for batteries and demanding uncooked and refined minerals and embedding recycling and remanufacturing as a part of a sustainable and resilient automotive enterprise mannequin.
5. Regulatory challenges and taxation can vastly scale back market entry and even offset FTA advantages, with producers of luxurious and sports activities automobiles notably uncovered to non-tariff boundaries and behind the border measures. This should even be thought of in all future commerce offers.

1: Overlaying all electrified vehicles, BEV, PHEV and HEV, and through SMMT member survey.
2: SMMT calculations overlaying BEVs (vehicles) solely. The ten% tariff applies to the manufacturing unit gate price of the automobile. Import prices based mostly on JATO general market common value, export worth based mostly on SMMT personal estimates.
3: SMMT calculations – Open Roads – Driving Britain’s international automotive commerce
4: UK Authorities – https://www.gov.uk/authorities/information/government-sets-out-path-to-zero-emission-vehicles-by-2035

SOURCE: SMMT