European and UK carmakers could receive additional time to meet electric vehicle supply-chain requirements as Brussels considers delaying tariffs linked to rules of origin. The proposed changes are intended to ease pressure on manufacturers that remain heavily dependent on imported battery components and materials.
The European Commission is consulting industry representatives on options to postpone the 10% tariff that would apply to most vehicles from January 1, according to people familiar with the discussions cited by the Financial Times. The UK is also supportive of delaying the measures, although formal negotiations are expected to begin after the EU-UK summit scheduled for November 20.
Battery Supply Chain Development Lags Behind Requirements
The rules of origin were established under the EU-UK trade agreement, which took effect in 2021. They were designed to encourage investment in regional battery production by gradually increasing the proportion of locally sourced components required for vehicles to qualify for tariff-free trade.
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However, the development of European chemical and battery manufacturing capacity has progressed more slowly than anticipated. As a result, many electric vehicle models continue to rely on battery packs and materials sourced from Asia.
The European Automobile Manufacturers’ Association (ACEA) estimates that approximately 82% of the 520,000 electric passenger cars and vans expected to be sold in 2027, representing around €17.9 billion in value, would be subject to tariffs under the current requirements.
ACEA has called for the stricter battery pack assembly requirement to be postponed until 2030. It has also requested that the requirement for European-made cathode materials used in battery electrodes be delayed until 2032.
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The existing rules have already been adjusted once, with changes initially scheduled for 2024 postponed until 2027. The EU and UK previously indicated that they would not repeat the extension.
Commission Weighs Alternative Compliance Options
The European Commission is reportedly considering a shorter postponement than the timeline requested by ACEA, partly to maintain demand for batteries and materials manufactured in Europe.
Two options under discussion include a straightforward one-year delay and a two-year arrangement that would allow manufacturers to offset vehicles exported with non-compliant batteries against domestically sold models equipped with compliant batteries.
The proposals remain subject to change. One industry representative described the potential arrangements as unusual but potentially workable, saying:
“We’re analysing this to see how we can maximise compliance under this system. How does it fit into how we operate?”
The possibility of delaying the requirements has drawn opposition from parts of the European chemicals industry. Companies have invested in domestic production of cathode active materials, which contain key metals used to form the positive electrodes in EV batteries. Industry representatives fear that postponing the rules could weaken demand for these European-made products.
UK Remains Dependent on Imported Batteries
The UK faces similar challenges in building a domestic battery supply chain. A report prepared by LSE Consulting for the Society of Motor Manufacturers and Traders (SMMT) found that approximately €72 billion had been invested in battery and EV manufacturing facilities since 2017. Despite this investment, the UK still imports around two-thirds of the lithium-ion batteries it uses.
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The country’s domestic battery manufacturing capacity remains relatively limited, adding to concerns about meeting the upcoming requirements.
SMMT chief executive Mike Hawes highlighted the importance of maintaining close trade relations between the two markets.
“The UK and EU are bound by €80bn in annual automotive trade and millions of jobs.”
He called for “a pragmatic solution to 2027 rules of origin, and stronger integrated supply chains”.
The LSE Consulting report also recommended closer alignment between EU and UK policies, citing their mutual dependence on the automotive sector.
Cross-Channel EV Trade at Stake
The scale of automotive trade between the two markets adds to the pressure to find a compromise. The EU accounts for approximately 60% of UK vehicle exports, while the UK represents around 30% of EU vehicle exports and is the largest market for electric cars manufactured in the bloc.
The report called for greater flexibility in applying rules of origin and a coordinated battery strategy.
For European manufacturers, a delay could provide additional time to expand local battery production without facing higher trade costs on a large proportion of vehicles. However, the EU must also balance the interests of automakers with those of battery and chemical producers that have invested in building a regional supply chain.
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The outcome of the discussions could therefore have significant implications for EV manufacturing, battery investment and automotive trade between the EU and UK from 2027.