No deal tariffs would increase costs of EVs, warns SMMT

The SMMT has warned that a ‘no deal’ tariff could add £2,800 to the average price of EU-built EVs, effectively cancelling out UK’s plug-in car grant.

SMMT says no deal would be the worst possible outcome for UK Automotive, for car buyers and for the country’s decarbonisation ambitions. The immediate imposition of blanket tariffs under World Trade Organisation (WTO) rules would add billions to the cost of trade and, crucially, to the cost of building and buying electric vehicles.

The 10% ‘no deal’ WTO tariff would add at least £4.5 billion to the annual cost of fully assembled cars traded between the UK and the EU, with an average hike of £1,900 per EU-built vehicle sold in the UK. However, new analysis shows that for fully electric cars fitted with expensive battery technology, the cost increase is even higher, at £2,800, effectively making the £3,000 plug-in car grant for these vehicles null and void.

Moreover, this tariff would also add some £2,000 on to the average cost of UK-built battery electric cars (BEV) exported to the EU, making our own products less competitive and the UK far less attractive as a manufacturing investment destination. This would further hamper the UK’s ambition to be a global leader in zero emission vehicle development, production and deployment, severely damaging industrial competitiveness.

The UK and EU automotive industries are deeply integrated, with around two thirds of all battery electric cars on sale in the UK built in European factories.4 New tariffs would hold back the evolution of the electric car from a niche technology to one with mass affordability. UK car buyers are currently on track to register some 78,000 BEVs this year, with further growth expected in 2021. However, SMMT estimates that the price shock caused by these tariff increases could reduce the increased demand for BEVs next year by at least 20%, even before the impact of potential, border delays, supply chain disruption and currency fluctuations are taken into account, hindering efforts to accelerate uptake and decarbonisation.

Mike Hawes, SMMT Chief Executive, said, “Just as the automotive industry is accelerating the introduction of the latest electrified vehicles, it faces the double whammy of a coronavirus second wave and the possibility of leaving the EU without a deal. As these figures show, ‘no deal’ tariffs will put the brakes on the UK’s green recovery, hampering progress towards net zero and threatening the future of the UK industry.

“To secure a truly sustainable future, we need our government to underpin industry’s investment in electric vehicle technology by pursuing an ambitious trade deal that is free from tariffs, recognises the importance of batteries in future vehicle production and ensures consumers have choice in accessing the latest zero emission models. We urge all parties to re-engage in talks and reach agreement without delay.”