United Kingdom Automotive EU Member States Approve EV Tariff Suspension

On December 21, 2023, the EU and the UK agreed to a three-year extension to the Trade and Cooperation Agreement’s (TCA) rules of origin for electric vehicles (EVs) and batteries from 2024 to 2027.

The TCA included a staged approach, requiring phased increases in the rules of origin requirements. The mandate previously required that by 2024, 40% of an EV’s value and 50-60% of EV batteries (for the battery cell and battery pack, respectively) would need to originate in the UK or EU or face a 10% tariff on vehicles traded both ways. The extension means that in 2027, 55% of an EV’s overall value and 65-70% of EV batteries must originate in the UK or EU. Until 2027, 40% of an EV’s overall value and 30% of batteries must be UK/EU content. No changes to the rules of origin will be possible before 2032.  

The decision was lauded by industry as:
•    A win for motorists, the economy, and the environment. 
•    A way to ensure a wider and more affordable choice of models. 
•    A safeguard for the competitiveness of UK automotive industries. 
•    A way to give the UK EV battery market time to meet demand.  
•    A path to cut carbon, support growth and jobs, and contribute to the decarbonization of road transportation.

Despite the delay, car manufacturers still need to meet their zero-emission targets under the Vehicle Emissions Trading Schemes Order (ZEV mandate) by decreasing the number of gas and diesel cars every year and scaling up the percentage of electric vehicles to 100 percent by 2035.

As the UK is moving towards a net-zero economy, the extension to the TCA’s rules of origin presents an opportunity for U.S. companies with expertise in clean technology and EV battery components and supply chains. U.S. companies have a worldwide reputation for innovative products, after sales service, and training which makes them competitive in the UK’s evolving zero-emission vehicle market. The U.S. and the UK also share similar business culture and business practices, which makes the UK an attractive market for U.S. suppliers.

For a statement on the Rules of Origin from the UK Government, please visit here.

For the EU press release on the Rules of Origin, please visit here.

For more information on the ZEV mandate, please see here. 

For more information contact Jill.Kruse@trade.gov.