electric charging Prius plug-in hybrid close up

Cars manufacturers have warned there will be a setback in development of the electric car market if there is no deal in the talks between the UK and EU over a free trade agreement.

The Society of Motor Manufacturers and Traders (SMMT) said leaving the EU without a deal would be the worst possible outcome for UK the Automotive industry, for car buyers and for the country’s ambitions to become a world leader in transport decarbonisation.

The immediate imposition of blanket tariffs under World Trade Organisation (WTO) rules would add billions to the cost of trade and to the cost of building and buying electric vehicles.

It said the 10% WTO tariff would add at least £4.5bn to the annual cost of fully assembled cars traded between the UK and the EU, with an average increase of £1,900 per EU-built vehicle sold in the UK. However, its analysis shows that for fully electric cars fitted with battery technology, the cost increase is even higher, at £2,800, effectively cancelling out the £3,000 plug-in car grant for these vehicles.

The tariff would also add about £2,000 to the average cost of UK-built battery electric cars (BEV) exported to the EU, making these vehicles 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.

Sales of BEVs have been growing strongly in the UK, but SMMT estimates that the price shock caused by the tariff increases could reduce demand for BEVs next year by at least 20%, and this could be compounded by potential, border delays, supply chain disruption and currency fluctuations.

SMMT chief executive Mike Hawes 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.”