SMMT warns 'no-deal' Brexit would undermine UK green recovery and net zero vision by heaping costs onto electric car manufacturing
The average price tag on an electric vehicle (EV) could shoot up by £2,800 in the UK in the event of a 'no-deal' Brexit, with resulting tariffs imposed on battery imports likely to effectively cancel out consumer savings from the government's plug-in car grants scheme, Britain's car industry has warned.
The Society of Motor Manufacturers and Traders (SMMT) said failing to secure a free trade agreement with the EU would undermine the government's 'green recovery' vision, as falling onto World Trade Association (WTO) tariff rules would lead to a hike in electric car costs in the UK, while also hitting exports of zero emission vehicles.
As a result, expected demand growth for electric cars next year could fall by as much as 20 per cent, the group warned, hampering the decarbonisation of UK transport, which remains the highest emitting sector of the economy.
"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," said SMMT chief executive Mike Hawes. "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."
The government has sought to place the green economy at the forefront of its Covid-19 economic recovery ambitions, promising to unleash a 10-point plan next month that is likely to see significant new support in areas such as battery technology and EV charging infrastructure. It is also shortly expected to announce a decision bringing forward the ban on fossil fuel car sales to 2035 or earlier, as well as publishing a Transport Decarbonisation Plan before Christmas.
But analysis released yesterday by SMMT suggests the car industry is likely to be particularly hard-hit by a 'no-deal' Brexit, as WTO rules would impose a 10 per cent tariff onto the trading of cars and vehicle parts with Europe, resulting in an average hike of £1,900 per EU-built vehicle sold in the UK.
Yet the impact on the EV market in the UK would be even more damaging, the SMMT warned, as the average cost of a fully electric car imported from the EU using "expensive" battery technology could jump by as much as £2,800. Such a hike would almost cancel out the £3,000 EV grant currently offered by the government to incentivise the uptake of zero emission vehicles, the trade body warned, potentially undermining the shift to greener road transport.
Moreover, WTO trade tariffs would heap an additional £2,000 on average to the cost of UK-built electric vehicle exported to the EU, further undermining the growth of the UK's domestic burgeoning EV manufacturing sector and "severely damaging industrial competitiveness", the SMMT warned.
The news comes amid surging sales of EVs in the UK, with the nascent sector showing remarkable resilience to the coronavirus crisis compared to the petrol and diesel segment, sales of which have plummeted in 2020. UK car buyers are currently on track to register a record 78,000 battery electric vehicles this year, with further growth expected in 2021.
But having benefitted from free trade between the UK and the rest of the EU for decades, Britain and Europe's automotive industries are deeply integrated, with around two-thirds of electric cars on sale in the UK built in European factories, meaning a no-deal Brexit could have a major impact on the UK EV market.
The SMMT estimates trade tariffs imposed by WTO rules if the UK fails to strike an agreement with the EU could see demand for EVs in the UK fall by 20 per cent next year compared to current growth expectations, even before taking into account potential supply chain disruption, border delays, and currency fluctuations.
Hawes therefore urged both the EU and UK negotiators to "re-engage in talks and reach agreement without delay" in order to stave off a huge hike in costs for the EV 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," he said.
The Department for Transport was considering BusinessGreen's request for comment at the time of going to press. However, the government has signalled that talks with the EU will resume next week following a hiatus during which the UK government threatened to halt the negotiations unless more concessions from Brussels could be secured.