UK Carmakers to Demand Two-Year Delay to Brexit EV Battery Tariffs

A 10% tariff on most UK-EU electric car trade is due to bite on 1 January — and the UK car industry is gearing up to demand a two-year delay to the rules behind it, brushing off a shorter European proposal as inadequate.

The European Commission has shared proposals with the automotive sector that would push back the start of the "rules of origin" requirement on batteries by one year, according to people familiar with the discussions. Those proposals have not yet been formally presented to the UK government. They are described as highly technical, including adjustments to customs procedures and origin calculation methodologies that could offer some temporary tariff flexibility.

For UK industry, a year is not enough. One UK-based executive was blunt about what practitioners should expect from the lobbying effort: "The industry will be really clear – two years minimum or we have the same discussion next year. Giga-industrialisation is happening in the EU and UK but it is not producing at the required volume yet."

What do the rules of origin actually require?

The Christmas Eve 2020 Brexit deal included a clause requiring British and European electric cars to use batteries made in either the UK or the EU, with local materials, or face a 10% tariff. The rules would not have existed had the UK stayed in the EU. Their stated purpose was to push the industry into investing in domestic lithium-ion battery manufacturing rather than leaning on the dominant Chinese battery supply chain.

The deadline was originally set for 1 January 2024. In 2020 that looked achievable. Three years on, several prominent battery projects on both sides of the Channel had collapsed, and the EU and UK agreed in December 2023 to extend the deadline — the first delay.

New projects have since replaced the failed ones, but most are not yet producing at the scale European demand requires. The result: carmakers remain heavily reliant on battery imports from China, Japan and South Korea, which is precisely the exposure the rules were designed to close off.

What would the tariff cost?

The European Automobile Manufacturers Association, the influential Brussels lobby group, has quantified the exposure. It estimates 82% of EU electric car and van exports to the UK would face the 10% customs duty in 2027 under the rules — adding costs of €1.47bn (£1.23bn) next year alone. The association has argued the tariffs represent a serious concern for Europe's automotive industry.

That figure gives both negotiating teams their arithmetic. Roughly four in five EU-built EVs shipped to the UK would fail the origin test three years from now, which tells you how far local battery capacity still trails assembly capacity on both sides.

Why isn't a deal done yet?

Carmakers in the UK and Europe are aligned in calling for another delay, but the tariff question is tangled up with two other disputes. The EU and UK are still wrangling over whether Britain can be included in "Made in Europe" subsidies, and whether the UK should match EU tariffs on Chinese car imports.

All three topics are likely to form part of an EU-UK summit planned for next week. One person involved said the negotiations would also focus on the technical details of the Commission's proposals, rather than simply landing on a set time delay — meaning customs procedures and origin calculation methods could carry as much weight as the headline end date.

What happens next?

For battery developers and recyclers watching from the material-stream side, the stakes are straightforward. Every year of delay is a year in which gigafactory projects on both sides of the Channel get breathing room to reach volume production — and a year in which imported cells keep flowing into UK and EU assembly plants without the 10% duty layered on top.

The decision point is now fixed: the EU-UK summit next week, where the length of the delay — one year versus two — gets negotiated against the subsidy-inclusion and China-tariff files. If no agreement lands before 1 January, the default in the Brexit deal takes over, and the 10% tariff starts charging the industry €1.47bn a year for batteries it cannot yet source locally.