EU carmakers warn of losses in post-Brexit electric vehicles trade

European carmakers have warned that they stand to lose €4.3bn and cut production by almost 500,000 electric vehicles unless Brussels agrees to delay the imposition of tariffs between the EU and the UK.

The European Automobile Manufacturers Association (Acea), an industry group, said China would be the biggest beneficiary if the EU does not agree to a British request to push the changes back from 2024 until 2027.

From next January, electric vehicles shipped between the UK and the EU face 10 per cent tariffs unless at least 45 per cent of their parts by value are sourced from within the two regions, under terms set out in the post-Brexit Trade and Cooperation Agreement (TCA). 

But Acea argues that the industry needs more time to wean itself off batteries that are still imported from China, South Korea or Japan — despite a push to build factories in Europe.

“Money is being spent to support electrification and the building of a European supply chain is accelerating. But it needs time. We have all been too optimistic,” Sigrid de Vries, director-general of Acea, told the Financial Times. “We are not asking to change the TCA . . . we just need more time.”

She said the group estimated that EU-based companies would pay €4.3bn in tariffs and lose sales between 2024 and 2027, resulting in about 500,000 fewer vehicles being made. “The UK is the number one export market for European carmakers. A quarter of EVs go to the UK,” she said.

Maroš Šefčovič, the EU commissioner responsible for UK relations, said in May that the bloc would not budge because it wanted to encourage carmakers to invest in domestic battery-making capacity. But he has asked Acea to submit evidence of the likely damage to the industry. 

The commission said it had “taken note of Acea’s estimates” but defended the TCA rules as a means to “develop a strong and resilient battery value chain in the EU”, according to a spokesperson. “Any issues regarding the TCA and its operation can be raised by either side in the bodies that were set up by the TCA.”

The level would be set at 22 per cent of sales for cars and 10 per cent for vans in 2024, rising sharply to 52 per cent and 46 per cent, respectively, by 2028. 

De Vries pointed out that the US has also offered vast subsidies to vehicle producers to make batteries and electric models as part of the Biden administration’s $370bn Inflation Reduction Act, making Europe a less attractive option. 

Investment plans in Europe have also been held back by Russia’s invasion of Ukraine, which increased energy and raw material prices, and in previous years the Covid-19 lockdowns that disrupted supply chains.

Without a postponement, China would be the big winner, De Vries said. 

She said models made there are paying tariffs but can already undercut EU rivals, which have a higher cost of production and less access to the critical raw materials used in batteries. In the UK, Chinese-made vehicles accounted for a third of EV purchases in 2022, 15 times the proportion in 2020.

“You are giving China sales by levying these tariffs. Lost market share is very hard to get back,” De Vries said.

Stellantis, which owns brands including Peugeot and Fiat, has already said it could close a UK van factory if the tariffs take effect next year. But the EU sends far more cars to the UK than the other way round, and would therefore pay more.

UK government ministers have held talks with EU counterparts and stress privately that a postponement would benefit London and Brussels.

Last year, the UK sold 47,000 electric vehicles to the EU, worth €1.2bn.

The EU has slightly increased market share since Brexit to about 47 per cent. In 2022, it exported 139,000 electric vehicles to the UK worth €5.1bn — which would amount to €510mn in tariffs once they kick in. But Acea predicts a big increase in exports to the UK as binding targets on manufacturers for zero emission vehicle sales begin in Britain next year.