Rules of origin regulation 'to be pushed back to 2027'

The European Union will be forced to push back the introduction of the much-criticised rules of origin legislation from 2024 until 2027, with the upcoming laws dubbed a “cliff edge” for the automotive industry, according to top executives. The rules, created as part of Brexit negotiations and due to come into effect on 1 January 2024 as it currently stands, limit where parts for an electric car may be sourced, with a heavy focus on batteries. It states that 45% of the value of an electric vehicle needs to originate in the UK or EU to remain tariff free for export (it is currently 40%) and 60% of the battery pack will also need to come from the UK or EU. Those whose vehicles do not meet these regulations will be fined – both local firms exporting to the EU and foreign firms importing to the UK. This, in turn, will drive up prices, with car makers needing to recoup losses sustained from the fines. “I think there will be an agreement,” Ford UK boss Tim Slatter confidently said today at the Society of Motor Manufacturers and Traders (SMMT) international summit in London. “There is a lot of lobbying happening. There is a good chance this will be agreed. We need to adjust the timeframe so we don’t just tax [EVs] as part of the decarbonisation strategy.” Much of the lobbying is coming from “counterparts in the European Union” he said, especially from Germany because the UK “is a big market for luxury German manufacturers” and “they will have to pay tariffs” as part of the upcoming rules. Pressed on a likely push-back date, Slatter said: “We think 2027. This will give us [the industry] enough time to get these changes in place.” The reason the date needs to be pushed back, said Slatter, is because “it is really difficult for the industry to meet these requirements [by 2024]”. He added: “We will be making eight electric vehicles in Europe for the European market, building the electric motors in Halewood, UK, and all of the batteries will be produced in Europe. But they [all of the cars] will not meet the regulations.” To achieve that would, he said, involve localising “tier-two and tier-three suppliers”, such as chemical plants, which provide the chemical mixes that go inside current-generation car batteries. “That’s just not ready yet,” he said. Slatter’s comments were backed by SMMT chief executive Mike Hawes, who compared the incoming law to a “cliff edge”. Asked what the current state of play was with negotiations between the UK and EU law makers, Hawes said: “It’s with Brussels. They are going through it, trying to understand it.” He added: “What we are asking is: suspend the incoming changes and let the current regulations flow through to 2027.” Responding to the concerns, Kemi Badenoch, secretary of state for business and trade, told the summit: “I have heard, very loud and clear, on the issues surrounding rules of origin. “Brexit was, I think, more dramatic for this sector than others, but one of the things I want you to know is we have been working on our close relationships with our EU counterparts. “There is a lot of work being done so that we can solve all of these issues.”