SMMT urges EU and UK to strike Rules of Origin deal to swerve 3,400 EV tax hike

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    SMMT urges EU and UK to strike Rules of Origin deal to swerve 3,400 EV tax hike

    The Society of Motor Manufacturers and Traders (SMMT) has today urged the EU and UK to delay the implementation of new Rules of Origin (ROO) requirements on batteries which could impose 10 per cent tariffs on battery electric vehicles (BEV) sold across Europe.

    Under current plans, from 1 January 2024 companies will have to demonstrate the origin of goods traded with the EU in order to avoid import tariffs through the Trade and Cooperation Agreement (TCA) between the UK and the EU. If a business cannot prove its products comply with ROO rules, it may be liable for full customs duty or potentially face penalties.

    Concerns are widespread across the UK and EU electric vehicle (EV) industry that the sector’s continued reliance on batteries imported from Asia could see the majority of manufacturers fall foul of the new ROO rules.

    According to calculations by the SMMT contained in a new report, titled Open Roads – Driving Britain’s global automotive trade, EVs falling short of new thresholds for domestic content would be subject to a 10 per cent tariff when traded across the Channel – resulting in a combined cost of £4.3bn.

    For the consumer, this could mean an average price hike of £3,400 on EU-manufactured battery BEVs bought by British buyers and a £3,600 hike on UK-made BEVs sold in Europe. According to the SMMT, 49 per cent of new BEVs registered in the UK in the first half of the year came from the EU.

    Given modern global supply chains regularly comprise components and companies from several countries, the application of ROO is likely to prove hugely complex and could potentially render EU and UK-made electrified vehicles uncompetitive in each others’ markets, according to the SMMT.

    As such, the trade body has today warned the new ROO rules threaten the rapid expansion of the UK’s EV market – which has grown 104 per cent in the three years since the EU-UK TCA was signed, up from £7.4bn at the end of 2020 to £15.3bn last year. Forecasts that UK trade in finished vehicles and components could exceed £100bn by the end of 2023 are also under threat, according to the  SMMT.

    With the rules due to come into force in just 75 days’ time, SMMT has urged both UK and EU authorities to consider a three-year delay to stricter rules to provide enough time for domestic gigafactories to come on stream that would allow manufacturers to source components locally.

    Mike Hawes, SMMT chief executive, said “unnecessary, unworkable and ill-timed” ROO rules would only serve to damage the automotive market’s recovery from the Covid pandemic and disincentivise the purchase of the very vehicles needed to hit climate targets given that conventional petrol and diesel vehicles are expected to escape the tariffs.

    “UK Automotive is a trading powerhouse delivering billions to the British economy, exporting vehicles and parts around the world, creating high value jobs and driving growth nationwide,” he said. “Our manufacturers have shown incredible resilience amid multiple challenges in recent years.

    “Not only would consumers be out of pocket, but the industrial competitiveness of the UK and continental industries would be undermined. A three-year delay is a simple, common-sense solution which must be agreed urgently.”

    The UK government and the EU are in talks to try and minimise the impact of the new rules, with recent reports suggesting a compromise deal that would delay the introduction of the ROO requirements could be delivered in the coming weeks. However, there is said to be disagreement between Westminster and Brussels on the length of any delay.

    A government spokesperson said: “We need a joint UK-EU solution to avoid consumers facing tariffs on electric vehicles from 2024 which do not apply to petrol and diesel cars.

    “We have raised this with the European Commission and industry and are ready to work with them to find a solution within the existing structure of the TCA. The UK remains one of the best locations in the world for automotive manufacturing.”

    The SMMT’s call comes as manufacturers face the introduction of the Zero Emission Vehicle Mandate, also set to come into force on 1 January, compelling them to sell increasing numbers of zero emission models – starting at 22 per cent next year and rising to 80 per cent by 2030.

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