UK and EU Secure Agreement to Extend Electric Vehicle Tariff Relief
This decision is anticipated to prevent 10 percent tariffs from being imposed on electric vehicle trade from January, providing relief to car manufacturers and consumers.
December 22, 2023. By Abha Rustagi
The agreement ensures the continuation of existing rules until the end of 2026, facilitating tariff-free trade in electric vehicles between the UK and the EU.
The phased approach initially introduced for EVs and batteries required incremental increases in rules of origin requirements, with the first set of changes scheduled for January 1, 2024, and a final increase planned from January 1, 2027. However, recognizing the unprecedented challenges faced by industries, the UK and EU have opted to extend the existing rules for an additional three years.
This decision is anticipated to prevent 10 percent tariffs from being imposed on electric vehicle trade from January, providing relief to car manufacturers and consumers. Industry estimates suggest potential savings of up to EUR 4.3 billion in additional costs.
Prime Minister Rishi Sunak expressed the government's responsiveness to the concerns of the automotive industry and said, "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. 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."
This agreement is part of the broader commitment by the UK and EU to strengthen the domestic battery supply chain. The Chancellor's announcement at the Autumn Statement highlighted the availability of EUR 4.5 billion over five years through the Advanced Manufacturing Plan to unlock private investment in strategic manufacturing sectors.
This includes over EUR 2 billion in research and development (R&D) and capital funding for the automotive sector, supporting the manufacturing and development of zero-emission vehicles, batteries, and the supply chain.
The government's commitment to spending over EUR 2 billion to accelerate the transition to zero-emission vehicles, coupled with regulatory frameworks such as the zero-emission vehicle mandate, positions the UK as a leader in the switch to electric vehicles.
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