07 Jan End of EU-UK TCA exemptions threaten EV trade
The UK-EU Trade and Cooperation Agreement temporarily exempts Electric Vehicles from Rules of Origin requiring substantial levels of domestic content to qualify for zero tariffs. The exemption is scheduled to terminate at the end of 2023 when RoO hurdles will steepen.
Under current TCA rules at least 40% of the content of EVs, and 30% of batteries, must originate from the EU or UK. From 1st January 2024 to 1 January 2027, this will increase to 45% of EVs and 50-60% of batteries. Failure to comply with the Rules of Origin means the EV incurs a 10% EU import tariff.
The timeline creates an apparently unsurmountable obstacle for EU and UK car makers as a high proportion of batteries originate from Asia – batteries account for up to 45% of the total EV value. Both the SMMT and ACEA are campaigning for an extension not the end 2023 deadline. However, current signals from Brussels are unsympathetic. Getting agreement on an extension requires a qualified majority of EU member states to agree an ROO change. A report in the FT hints that both the UK and EU fear requesting an extension because it would be met with demands for concessions in other areas.
For further information see this Fleet News Report