The European Union has proposed an 11th-hour intervention to delay imminent post-Brexit tariffs that could add thousands of pounds to the cost of new EVs.

Brussels is proposing a three-year delay to the introduction of stricter Rules of Origin, averting the risk of tariffs on new EVs

According to the Financial Times, Brussels is proposing to a three-year delay to the introduction of stricter Rules of Origin, due to take effect from 1 January 2024.

It follows months of campaigning by the automotive sector in both the UK and EU, which have said the new rules were “over-demanding” and would limit availability of EVs while hiking up the costs of those available.

The regulations, set under the EU-UK Brexit deal, place minimum restrictions on all battery parts and some battery raw materials to ensure they’re locally sourced within the EU or UK. These get tougher from 2024.

The rules were meant to stop the threat of cheap imports. But without action, electrified vehicles that do not meet the new thresholds from 1 January 2024 will be subject to a 10% tariff when traded across the Channel – likely to be passed to some extent onto car buyers.

For buyers – including fleets – this could mean an average price hike of £3,400 on EU-manufactured battery electric vehicles (BEVs) bought by British buyers, and a £3,600 rise on UK-made BEVs sold in Europe. The rules also get tougher still from 2027.

According to the FT, the EU is now pulling out all the stops to avert this – and the delay is expected to be approved by EU member state ambassadors in a meeting next week.

The UK’s Society of Motor Manufacturers and Traders (SMMT) has been calling for a delay to the stricter rules since the spring.

It’s repeatedly said a three-year pushback would provide the necessary time for EU and UK gigafactories to come on stream as well as helping the development of local battery parts and critical mineral supply chains.

Speaking earlier this year, Mike Hawes, SMMT chief executive, said: “Unnecessary, unworkable and ill-timed rules of origin will only serve to set back the recovery and disincentivise the very vehicles we want to sell. Not only would consumers be out of pocket, but the industrial competitiveness of the UK and continental industries would be undermined. A three-year delay is a simple, common-sense solution which must be agreed urgently.”

Earlier this week, Cornwall Insight and law firm Shoosmiths warned that the regulations could discourage investment and slow down the transition to EVs. They added that the tariff would mean the cost-gap between EVs and more polluting vehicles could widen by a significant amount, as petrol and diesel vehicles would be unaffected.

Jon Lawes, managing director at Novuna Vehicle Solutions and MHC Mobility, commented: “If approved, this breakthrough is a lifeline for the UK and European motor industry. The Rules of Origin tariffs have cast a long shadow over the switch to EVs in the UK and Europe. With UK EV registrations declining in November, the rules threatened to further hit vehicle production costs and dampen EV adoption.

“With the new year’s cliff edge averted, the industry and policymakers on both sides of the Channel need to focus on scaling up domestic battery capacity and tackling the persistent charging infrastructure deficit to create a sustainable, competitive market for EVs.”

Industry consultancy firm NTT DATA UK&I said the tariffs had been set up as “well-meaning, protectionist measures against Chinese EV dominance” but had “backfired, leading to huge obstacles for UK car manufacturers and their buyers”.

Dominic Rowles, head of automotive at the business, said: “As ever, these are the unintended consequences of a noble idea. These tariffs were intended as a protectionist measure to defend the EU and UK markets against the influx of Chinese EVs, which have surprised the European car industry with their ability to launch multiple new EV brands into the market.

“However, these tariffs have ended up potentially having the opposite effect on our car industry, stopping us selling UK-assembled cars because of the location of a large proportion of the components. This was a stick, rather than a carrot, to persuade the EU–UK original equipment manufacturers (OEMS) to invest more into local EV components production, but that turned out to be unrealistic.

“As we have found with other green initiatives, being forced into change by the regulatory environment when there isn’t an easy and cheap alternative is usually unsuccessful.”