CEO Update

Pragmatic solutions needed to stave off EV tariff threat

20 October 2023 #CEO Update

SMMT’s second Global Trade Conference lived up to its name this week, drawing an audience from all corners of the world to discuss one of the biggest priorities for any automotive manufacturing nation and market with ambition to grow – trade.

Free and fair trade is the goal of every global industry, not least our own – and it has been the bedrock of the UK and EU automotive industries’ success, something the Trade and Cooperation Agreement recognised and enabled. As our latest report, Open Roads – Driving Britain’s global automotive trade, shows, since the TCA came into force, our mutual trade in electrified vehicles has grown exponentially – today worth some £15.3 billion, up from £7.4 billion just three years ago, despite the myriad geopolitical headwinds.

But, from 1 January, new rules of origin threaten to undermine this growth with a potential £4.3 billion tariff bill – driving the cost of a new EU-manufactured EVs up by an average of £3,400 for UK consumers and adding £3,600 to the price of UK-built vehicles in the EU, while ICE vehicles go duty-free. Given our shared net zero ambitions, this is a perverse and unnecessary scenario, easily avoided with a three year delay to TCA origin requirements to give time for battery supply chain investments to come on stream.

It was all the more encouraging, therefore, to hear the Secretary of State for Business and Trade, Kemi Badenoch MP, say in her keynote address that she was optimistic a solution would be found. We know there is near unanimity in Europe on this issue and hope that pragmatism prevails – as we saw recently when South Korea and the UK agreed to avoid tariffs by extending EU cumulation for two years while a modernised FTA is negotiated.

Such common sense should be applied to all our trading relationships – existing and new. We need to develop and deepen our longstanding and closest alliances with Europe and Japan; build an open dialogue with China; and increase engagement with India, the Gulf States and North America. After all, given the interconnected nature of our industry, friction-free trade for all will allow us to meet the climate challenge together.

My thanks go to all of our Global Trade Conference speakers, including the Secretary of State for Business and Trade, the Rt Hon Kemi Badenoch MP; Shadow Minister for International Trade, Gareth Thomas MP; Sigrid de Vries, Director General at ACEA; Vinnie Mehta, Director General of ACMA; David Schwietert, Chief Policy Officer of Alliance for Automotive Innovation; Dr Markus Thill, President of Bosch Africa; Rob Cook, Deputy Director at the Department for Business and Trade; Dr, José Zozaya, Executive President of AMIA; and Matthew Godlewski, Vice President International Government Affairs at Ford of Europe. Thanks as well to our supporting partners: AAAM, CMIA, North East Automotive Alliance, SIMI and the Welsh Automotive Forum.

Finally, I’d also like to thank Greg Clark MP, Chair of the House of Commons Science and Technology Committee and Vice Chair of the All-Party Parliamentary Motor Group and Kevin Hollinrake MP, Minister for Enterprise, Markets and Small Business, Department for Business and Trade, for hosting SMMT’s Global Trade Parliamentary Reception, alongside all those able to join us from across Houses and the wider industry. Such cross-party support is a testament to the importance of our sector to the economy, society and, indeed, the environment.

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