Car makers in UK hope for delayed post-Brexit tariff

Carmakers in the United Kingdom are hoping for a postponement in a 10 per cent tariff on electric vehicles mandated by a provision in the post-Brexit EU trade treaty.

Britain clinched a last-gasp free trade deal as it left the European Union. The deal removed tariffs for the nation's largely foreign-owned carmakers.

However, as per the "rules of origin" of the trade deal, at least 45 per cent of the value of vehicle parts should come from Britain or the EU in order for the vehicle to be exempt from customs duties 2024 onwards.

For an electric vehicle, batteries represent a significant chunk of the final sale price. The batteries often originate from China. The UK has been trying to establish its own gigafactories for manufacturing of the batteries.

"We are still optimistic that an agreement will be reached" before the looming change on January 1, said Mike Hawes, chief executive of industry body the Society of Motor Manufacturers and Traders. AFP quoted Hawes.

"It makes common sense because the last thing you want to do is put additional tariffs on the very vehicles you are encouraging people to buy," he told an SMMT conference in London.

Hawes added: "We are optimistic but I can see this going down, like we did with Brexit, to Christmas Eve or something like that."

The UK has plans to ban sales of new petrol and diesel vehicles from 2030. The country is aiming for net-zero carbon emissions by 2050. This means that by that year, the sector must produce fully electric cars.

Britain is also a vital market for EU-based car producers.

Germany urged the European Union this month to postpone the impending tariffs on electric car sales between the UK and the EU, according to a report in Financial Times.

There is a possibility that the customs duties would be hiked even more, especially as the EU is seeking to defend its own industry from unfair competition. Just last week, Brussels announced an investigation into state subsidies China offers for electric cars.

Monday's SMMT plea comes one week after German car giant BMW unveiled plans to ramp up production of electric Mini cars in Britain, backed partly by UK support.

India's Tata Group in July said it would build a £4-billion ($4.95 billion) plant in Britain to manufacture batteries, as nations accelerate away from fossil fuel vehicles.

(With inputs from agencies)

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