The Society of Motor Producers and Merchants (SMMT) is at present 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 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 autos that don’t meet the brand new thresholds will likely be topic to a ten% tariff when traded throughout the Channel, leading to a mixed price of £4.3 billion.¹ For the buyer, this might imply a median worth hike of £3,400 on EU-manufactured battery electrical autos (BEVs) purchased by British patrons, and a £3,600 rise on UK-made BEVs offered in Europe.²

Even in opposition to 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 yr, though a lot of this uplift has been within the final 12 months.³

The state of affairs has helped complete UK automotive world commerce in completed autos and parts get again on monitor following the pandemic, and it’s at the moment on the right track to be value greater than £100 billion by the tip of 2023, in keeping with the newest SMMT report, Open Roads – Driving Britain’s world automotive commerce, revealed at present.

This progress is now threatened, nevertheless, as guidelines that have been agreed earlier than the pandemic, warfare 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 enhance would act as a barrier to uptake, undermining their competitiveness in an essential and rising market. Moreover, the appliance 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 most important 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 situation 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 alternative if any electrified fashions turn out to be uncompetitive within the market in a single day. The problem comes at an important time, with producers additionally going through the UK Zero Emission Automobile Mandate, which is more likely 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 answer. It might present the mandatory time for EU and UK gigafactories to return on stream in addition to serving to the event of native battery components and important 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 at present, Mike Hawes, Chief Government, stated,

UK Automotive is a buying and selling powerhouse delivering billions to the British financial system, exporting autos and components around the globe, creating excessive worth jobs and driving progress 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 could be undermined. A 3-year delay is an easy, commonsense answer which have to be agreed urgently.

Launched on the convention, Open Roads – Driving Britain’s world automotive commerce, outlines the important significance of worldwide commerce to the UK automotive sector with key suggestions to guarantee progress, 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 parts.
2. 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.
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 taking part in discipline devices and new company sustainability obligations – these have to be thought of in future negotiations.
4. Strengthening the UK and broader European provide chain for batteries and important 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 significantly cut back market entry and even offset FTA advantages, with producers of luxurious and sports activities autos notably uncovered to non-tariff boundaries and behind the border measures. This should even be thought of in all future commerce offers.

1: Masking all electrified automobiles, BEV, PHEV and HEV, and by way of SMMT member survey.
2: SMMT calculations protecting BEVs (automobiles) solely. The ten% tariff applies to the manufacturing facility gate price of the automobile. Import prices based mostly on JATO general market common worth, export worth based mostly 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

SOURCE: SMMT