U.K. Auto's Early Christmas Present As EU Tariffs Deferred

Christmas comes early for the U.K. automotive industry as the nation wins an agreement with the European Union to defer the introduction of tariffs under "rules of origin" legislation which hits battery-electric vehicle production hardest.

According to the U.K. government’s website, both parties agree to extend trade rules on BEVs until the end of 2026 to keep costs down for manufacturers and consumers.

To access zero tariffs under the Trade and Cooperation Agreement (TCA), businesses must prove their products include a minimum level of EU- or U.K.-manufactured content known as rules of origin. These help determine where products originate, rather than where they’re shipped from, to ensure lower tariffs are applied to eligible products and support market competition.

Under the existing TCA, a staged approach was introduced for BEVs and batteries which required phased increases in these rules of origin requirements, with the first increase due to take effect Jan. 1, before a final increase from Jan. 1, 2027. This phased approach would increase the content requirements for BEVs to be eligible for tariff-free trade over the next three years. These were initially designed to reflect industry capability at the time and boost investment potential in domestic battery production.

With so much of the existing BEV production in the U.K. emanating from Asian sources, holding to the first deadline would have seen British-built vehicles face a stiff 10% tariff to enter the European market. Now, thanks to the deferral agreed with the EU, the existing rules of origin will last for a further three years until the end of 2026.

Welcoming the agreement, Mike Hawes, chief executive of the Society of Motoring Manufacturers and Traders, says: “Deferring the rules of origin is a win for motorists, the economy and the environment. Maintaining tariff-free trade in EVs will ensure consumers retain the widest and most affordable choice of models, at a time when we need all drivers to make the switch.”

Ford of Britain’s chair, Lisa Brankin, adds, “Today’s decision to avoid unnecessary tariff costs is a major moment that will protect jobs, support countless investments and, most importantly, help to keep costs down for consumers and businesses on their journey to an all-electric future.”