Mike Hawes is getting used to Brexit negotiations being concluded at the last minute, but he could do without them. The director of the Society of Motors Manufacturers and Traders (SMMT), the British automobile lobby, recalls with immense relief the signing of the Brexit agreement, concluded on December 24, 2020 between the United Kingdom and the European Union ( EU). Within a week, his sector avoided the imposition of 10% customs duties, which would have brought it to the ground.
But as nothing is simple about Brexit, the threat is back three years later. Unless there is a last minute agreement, customs duties of 10% will be imposed from 1er January 2024, only for electric vehicles. “It would be perverse, when these are precisely the vehicles we are trying to encourage people to buy”, underlines Mr. Hawes, before an automobile conference organized in London on Wednesday October 18. On average, this tax would increase the price of vehicles by around 4,000 euros.
Such customs duties would hit car manufacturers based in the United Kingdom hard (half of their production, or 750,000 vehicles per year, is exported to the EU), but even more European manufacturers, who export 1, 3 million vehicles per year in the UK. Yet the EU remains divided on the subject, with the French seen as the most staunchly hostile to a deal. “Thierry Breton [le commissaire européen au marché intérieur] seems the most opposed, while the directorates of the European Commission for trade and the environment are more favorable to it”continues Mr. Hawes.
Request for three-year deferral
The problem comes from what experts call the “rules of origin” included in the Brexit agreement of December 2020. To benefit from the exemption from customs duties, it is necessary to prove that the vehicles are actually manufactured either in the Kingdom -United or in the EU. For electric vehicles, this initially required having at least 30% of batteries produced locally. This level will increase to 50% in January 2024, then to 65% in 2027. However, neither the EU nor the United Kingdom are ready. For now, the vast majority of batteries (or their components) come from China. Several battery factories are being built, but they won’t be ready by 1er January 2024. For the moment, practically no electric cars comply with the new rules of origin.
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