The growth of electric car production in Britain is under threat from a Brexit “cliff edge” in January unless the EU agrees to delay new trade rules until 2027, industry leaders have warned.
Electric cars exported from the UK to the EU will have to meet tighter “rules of origin” in the new year, which mean batteries must be sourced from within the two trade partners or face 10% tariffs.
However, as UK and European manufacturers are reliant on batteries from Asia, tariffs appear all but inevitable under the rules.
Mike Hawes, the chief executive of the Society of Motor Manufacturers and Traders (SMMT), said: “There is huge potential for growth, and that growth is now at risk from tariffs.
“We’re saying basically suspend that requirement, and just let the regulation that’s currently in place flow through to 2027, which is the next threshold.
“We need to make sure those [tariffs] aren’t applied or else there is the real potential that the [electric vehicles] EVs are more expensive and face a tariff whereas petrol diesel don’t.
“We can’t afford to have a last minute, 31 December agreement, because business needs to plan its volumes.”
The SMMT has called for political parties in the UK to have an industrial strategy to create the conditions for a tenfold rise in the production of battery-powered electric vehicles to more than 750,000 a year by 2030, as it highlighted growing global competition.
As a central London conference attended by international carmakers and investors got under way, the SMMT said such a production boost was equivalent to a cumulative £106bn worth of vehicles at the factory gate. This level of growth depends on British factories attracting the next generation of electric models and scaling up the supply chain.
Production has steadily recovered since the Covid-19 pandemic and manufacturing jobs in the sector rose 4% to 208,000 in the last year. A further 24,513 battery electric vehicles joined the road in May, up 58.7% year on year to secure a 16.9% market share.
Last year, when Britain’s annual car production fell by nearly a tenth to 775,014, the lowest in more than six decades, UK factories produced a record 234,066 battery electric vehicles, plug-in hybrid and hybrid electric vehicles, with combined volumes rising 4.5% year-on-year to make up nearly a third of overall output.
On Tuesday, the SMMT called on all political parties to recognise the strategic importance of the sector to the UK, which faces fierce global competition as other countries offer huge cash incentives and subsidies to attract green manufacturing.
The business secretary, Kemi Badenoch, told the conference she had “heard very loud and clear the issues on rules of origin”, and said she planned to raise the issue with the EU’s ambassador to the UK on Tuesday.
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Badenoch, who supported leaving the EU, also acknowledged that “Brexit was more dramatic, I think, for this sector than many others”.
She also said she would publish a plan for advanced manufacturing next month, with the automotive transition to electric vehicles a key focus.
Labour party has said it would invest billions of pounds in the automotive sector if it were in power. On Tuesday, it set out measures to “turbocharge” the switch to electric motoring.
The shadow transport secretary, Louise Haigh, announced a plan to rapidly scale up electric vehicle battery production, which Labour said could create 80,000 jobs and trigger more than £30bn in investment.
Speaking at the SMMT conference, Haigh urged the government to take urgent action on the Brexit trade rules. “Labour are urging the government to prioritise an agreement with the European Union to ensure manufacturers have time to prepare to meet rules of origin requirements and make Brexit work for them.”
She said Labour would “build resilience and security” by ramping up domestic battery capacity and expanding the rollout of electric vehicle chargers.