Electric cars from Volkswagen on a transporter last month in Zwickau, Germany. Photograph: Cy Goddard imagesRepresentatives of the electric car sector in Brussels have warned that EU exports of electric cars to the UK worth €30bn a year could be jeopardised unless the Brexit trade deal is modified. Three of the world’s largest car manufacturers have already called on the UK government to open talks over new rules that will see 10% tariffs imposed on exports to the EU if 45% of an electric vehicle by value does not originate in the EU or UK. The European Automobile Manufacturers’ Association (ACEA) has now quantified the risk to manufacturers who ship in the other direction, saying it could add more than €3bn in costs to the EU industry.
The UK car manufacturer Stellantis, which oversees 14 brands including Vauxhall and Jeep, recently warned that it may have to shut down its operations in the country, resulting in the loss of thousands of jobs, if the new rule of origin is implemented in January. The issue at the heart of the matter is a lack of understanding about the proportion of an electric car's cost that comes from the refinement and processing of chemicals in batteries, which is mainly carried out by China, according to the European Automobile Manufacturers' Association (ACEA). ACEA's Director General, Eric-Mark Huitema, has said that China is the primary supplier of "refined" active materials in batteries, including nickel, manganese, and cobalt oxide. The battery is a high-value component of an electric vehicle, accounting for between 35% and 45% of the cost of a passenger car and between 45% and 50% of a heavy-duty truck's cost. ACEA has formally written to the European Commission outlining the costs and arguing that Europe needs three more years to increase battery supply and chemical refinement, which are critical to the process. The current trade agreement only requires that the battery cell be assembled in Europe, but from next year, the parts, including the cathode material, must also come from Europe, including the UK, which ACEA claims is impossible. ACEA is not advocating for less restrictive rules but is instead requesting a bridging mechanism for the next three years
The UK has been suggested to join the Mediterranean agreement by the European commission vice president, Maroš Šefčovič, which permits parts made in one country but assembled in another to be treated as one export source. However, O’Riordan dismissed this suggestion, stating that it was not a solution for the next three years and that China still dominated the supply of refined chemicals. The auto sector is still working to adjust the trade deal, but hopes of a review before 2026 have been dashed by Šefčovič and Stefan Fuehring, a senior EU official in the negotiations. The EU has acknowledged the estimates provided by ACEA, but remains inflexible in protecting agreements. Nevertheless, the possibility of change still exists with political will.
