UK EV trade booms, but brexit rules threaten future growth

Five years after Brexit, the UK’s automotive sector remains a global trade leader, but new data from the Society of Motor Manufacturers and Traders (SMMT) warns that future growth in electric vehicle (EV) trade with the EU is at serious risk unless urgent action is taken.

According to SMMT’s latest trade report, EV trade between the UK and EU has soared since the pandemic, with the value of cross-Channel shipments of battery electric, plug-in hybrid and hybrid vehicles climbing 424% - from £4.6 billion in 2019 to nearly £24 billion in the 12 months to June 2025.

Electrified vehicles now dominate UK-EU automotive trade, outpacing internal combustion engine (ICE) exports and imports for the first time. The UK’s exports of electrified vehicles to the EU are worth double those of ICE models, while EU electric vehicle exports to Britain reached £17.6 billion over the past year - more than double the value of EVs imported from China.

However, the report warns that this rapid progress is under threat from looming post-Brexit trade rules. Tougher “rules of origin” requirements under the UK-EU Trade and Cooperation Agreement (TCA) are due to take effect in January 2027. These require that a significant proportion of EV components – especially batteries – be locally sourced within the UK or EU to avoid tariffs of up to 22%.

Yet the definition of key components like cathode active materials (CAM) remains unclear, and current production capacity for batteries on both sides of the Channel is insufficient to meet demand. Unless battery supply chains scale up dramatically – a scenario the report calls “impractical” within the 16-month timeframe – electric cars, buses and vans will become subject to high tariffs, making them less competitive than petrol or diesel models, which currently face zero tariffs.

SMMT is urging the UK government to act swiftly. It is calling for engagement with the EU to clarify CAM definitions, monitor industry compliance with the new rules, and explore rejoining the Pan-Euro Mediterranean (PEM) Convention on rules of origin – a move that could help ease trade restrictions with the EU and 14 other markets.

Mike Hawes, SMMT Chief Executive, said: "Despite the most difficult environment in decades, UK Automotive remains a powerhouse of global trade. With its unmatched diversity and world-class capability, the sector already trades across the world. But the global trading environment is getting tougher; more competition, more protectionism and more geopolitical tension. Forging closer trading relationships, notably with the EU, and implementing industrial and trade strategies with automotive at their heart will enable us to grow our economy, create thousands of highly skilled jobs, and lead the charge toward net zero.”

The UK automotive sector generated £115 billion in imports and exports last year and is on track to exceed £110 billion in trade for the third consecutive year. But with the trading landscape becoming increasingly competitive and protectionist, the industry says policy clarity and stronger EU ties are critical to ensuring continued success - particularly in the fast-growing EV market.