Electric car tariffs avoided after UK and EU extend trade rules

New rules of origin requirements were due to come into force from January 1

Britain's PM Rishi Sunak on the Nissan Juke production line in Sunderland earlier this year. He described the latest move as 'a pragmatic solution to keep costs down'. AFP

Tariffs on electric vehicles due to be introduced next year will be avoided after the UK and the EU agreed to extend trade rules, British Prime Minister Rishi Sunak has announced.

The two parties have decided to maintain existing regulations until the end of 2026.

Following post-Brexit negotiations, rules of origin requirements were due to come into force on January 1, under which tariffs of 10 per cent would be imposed on car sales between Britain and EU countries if at least 45 per cent of the vehicle’s value did not originate in the UK or the bloc.

EV manufacturers were expected to struggle to meet that threshold as battery production in Europe has not increased as quickly as hoped.

The Society of Motor Manufacturers and Traders (SMMT) estimated tariffs could result in an average price rise of £3,400 ($4,300) on EU-manufactured pure battery EVs bought in the UK.

The automotive industry had pleaded with the government to secure an agreement with the EU to delay the changes.

“We have been listening to concerns of the sector throughout this process and I know this breakthrough will come as a huge relief to the industry," Mr Sunak said.

“The UK government is delivering a pragmatic solution to keep costs down for businesses and for people at home who want to make the switch to electric vehicles.

“We are also leaving no stone unturned to bolster our domestic battery industry and deliver long-term certainty for our thriving automotive sector to help them grow their roots in the UK.”

The announcement was welcomed by the car industry.

“Deferring the rules of origin is a win for motorists, the economy and the environment," SMMT chief executive Mike Hawes said.

“Maintaining tariff-free trade in EVs will ensure consumers retain the widest and most affordable choice of models, at a time when we need all drivers to make the switch.

“Governments have listened to the sector and acted to safeguard the competitiveness of the EU and UK automotive industries and give the Anglo-European battery industry the critical time it needs to catch up.”