CEO Update

Proposal to extend UK-EU EV trade rules is major breakthrough but plan must be adopted urgently  

08 December 2023 #CEO Update

After a lengthy period of campaigning for a solution to the challenge of tougher UK-EU rules of origin on EVs, this week delivered a breakthrough as the European Commission responded with a proposal that would edge our respective automotive industries back from the brink. Its 11th-hour plan to extend the current rules for electric vehicles until 2027 is a simple and sensible approach. One that will avoid a hit to our mutual trade, maintain competitiveness and, crucially, keep costs down for consumers who we so desperately need to buy these vehicles. It is vital for our economies and the environment that every government backs the proposal. And with just 24 days to go, we need an urgent agreement and delivery at pace.

When the UK-EU Trade and Cooperation Agreement was designed, no one could have anticipated a global pandemic or war in Ukraine; nor the seismic supply chain disruption, spiralling energy costs and inflation that followed – all of which restricted the battery industry’s ability to build up the local EV supply chains, in particular batteries, needed to meet the rules.

As the past year has shown, investment is coming – big announcements for EV production and gigafactories, £2 billion of government funding to support industrial transition. Extending the current rules of origin will give the time and certainty necessary for investments to come to fruition – but, again, there is no time to lose.

In the UK, the need for these vehicles – at affordable not tariff-hit prices – is acute, with manufacturers gearing up to meet the new ZEV Mandate. SMMT figures for November, out on Tuesday, showed that while the long term EV growth trend continues, demand in both the van and private retail car markets is showing signs of plateauing. With COP28 underway, now is the time for measures that encourage all drivers to make the switch. Fiscal incentives such as halving VAT on new BEVs to give consumers the same benefit as company buyers; equalising VAT on public charging with domestic energy use; and driving greater and faster investment into infrastructure are all transformative levers government could pull.

Wrapping up the week, SMMT visited China for the first time since 2019 as part of a delegation with the Department for Business and Trade and several leading UK automotive companies. Visits to BYD, EVE, Guangzhou Auto and Xpeng, plus the World New Energy Vehicle Congress and Sino-UK Automotive Working Group gave a renewed sense of how fast the market and companies are changing, with an increasing focus on export markets. The UK and Chinese auto sectors have a productive relationship, with bilateral investment increasing over the years. The industry needs free and fair trade, and close communication and collaboration is the starting point for business growth.