The Prime Minister of the United Kingdom Boris Johnson holds an electric cable while he visits the … [+]
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EU and UK negotiators finally reached an agreement on their post-Brexit relationship on Christmas Eve. While both sides felt that their conversations had been folded the day before, some last-minute technical issues kept them going for another day. One of those technicalities was the tough question about electric car batteries.
For many weeks, EU manufacturers had been pushing for Michel Barnier, the EU’s chief Brexit negotiator, to reduce his negotiating stance on rules governing trade in electric cars. They were concerned that if the EU introduced the car would be exported locally to either the UK or the EU in order to avoid tariffs it would impede trade in electric vehicles, as batteries make up for so many cars like that. These battery cells are mainly manufactured outside of Europe, usually in China, South Korea and Japan.
British negotiators had proposed flexibility that would allow up to 70% of parts in electric cars to come from outside Europe and still be certified or zero. In the final days of negotiations, the EU offered 45%. But there were fears that that would not be enough for most electric cars that, for now, are made outside Europe. Automakers warned that this could work against green transport targets in the EU and the UK, which both want to increase the electricity of their vehicle fleet. Tariffs on cars would be about 10% of their value.
“Considering that a battery can represent between 30-50% of the value of the battery electric vehicle, the threshold would have to be well above the 45% announced by the Commission,” Eric Mark Huitema, head of the European car industry lobby group ACEA, he wrote to Barnier in October.
Eventually, the EU agreed to allow exemptions for electric cars, but only for six years.
This means that until 2026 European carmakers will have to change their battery supply chain from East Asia to Europe. Furthermore, the 10% tariffs will start to apply to the sale of electric cars from the UK to the EU or vice versa, if the electric cars are made up of more than 55% non-European parts.
Despite the grace period, a number of manufacturers have already decided to move production out of the UK rather than against the risk of a Brexit unrest. Nissan reportedly this year decided to ship the upcoming Ariya electric vehicle model to Europe from Japan rather than implement it in the UK, where one of its factories is closing due to Brexit.
In November 27% of new cars in the UK fell and are down by almost a third this year.