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EU delays automotive rules of origin change

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The UK automotive industry has been given a reprieve with the delay of rule changes that could have seen UK-produced electric vehicles (EVs) charged a 10% tariff when exported to the European Union (EU).

Rules of origin dictate the proportion of a vehicle that must be sourced from either the UK or EU to qualify for tariff-free status under the UK – EU trade deal. It is currently at 40%, and was scheduled to be increased to 45% in the New Year. Many manufacturers feared they would be unable to meet this requirement due to the lack of domestically produced batteries.

While the delay will be welcome news, EU Commissioner Maroš Šefčovič pointed out that further postponements would be legally impossible in the coming years, meaning that the 55% rules of origin threshold will still come into force in 2027. Raam Hargun of law firm Pinsent Masons said that this strict deadline means the UK must be ready for the period after December 31, 2026, adding:

“While it may seem like the pressure is off, the UK will need to keep its foot on the pedal to ensure that plans are in place well in advance of 31 December 2026, to secure the future of the UK’s green automotive industry.”

While EVs have become increasingly popular, with brands like Castrol and Mobil having developed specialised lubricant and coolant products for EVs, battery production has failed to keep pace both in the UK and the EU, meaning that batteries need to be imported from places like China.

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