Car Makers Taking a Cautious Approach to Electric Vehicle Sales in 2024 Due to Possible Tariffs

The Society of Motor Manufacturers and Traders (SMMT) has warned that car makers are being cautious about electric vehicle sales in 2024 due to potential tariffs imposed by the European Union. Mike Hawes, CEO of the SMMT, stated that negotiations between the UK and the EU regarding trade rules are likely to continue until the last minute, leading car manufacturers to adopt a risk-averse approach to sales numbers early next year. Both UK and EU manufacturers have called for a delay in post-Brexit trade rules that would result in tariffs on the export of UK-made cars, particularly electric models.

Starting from January 2024, the bloc’s rules of origin provision will come into effect, which means that exports of electric cars between the UK and the EU will incur a 10% tariff if at least 45% of their value is not originated from the UK or EU. These restrictions will become even stricter from 2027. As many electric vehicle batteries are produced in China, the prices of vehicles shipped between the UK and the EU are expected to increase unless the implementation of the new rules is postponed. Car makers will have to decide whether to absorb the extra costs or pass them on to consumers.

In an interview, Mike Hawes expressed optimism that an agreement between the UK and EU will be reached, as it would not make sense to impose additional tariffs on vehicles that are being promoted for purchase. However, he stated that most companies have likely already made their product allocation decisions for the first half of 2024 and will therefore take a risk-averse approach. The SMMT CEO compared the situation to Brexit negotiations, suggesting that the talks between the UK and the EU may go down to the wire. Alex Smith, managing director of Volkswagen Group UK, commented that anything that makes electric vehicles more expensive would be unhelpful for the sector.

Business Secretary Kemi Badenoch acknowledged that the UK and EU have been in talks about the impact of rules of origin on electric vehicle manufacturers for a long time. She stated that increased tariffs on each other’s products would only benefit Chinese companies that produce car batteries. Prime Minister Rishi Sunak also highlighted that the post-Brexit rules could impact EU manufacturers as well. The European Automobile Manufacturers’ Association (ACEA) is calling for a three-year postponement to the new rules, as it estimates that tariffs without a delay could amount to €4.3 billion between 2024 and 2026, potentially decreasing electric vehicle production by 480,000 units.

– The Society of Motor Manufacturers and Traders (SMMT)
– European Automobile Manufacturers’ Association (ACEA)