Update on Electric Vehicle Rules of Origin Extension

Statement

On 21 December, the United Kingdom (UK) and the European Union (EU) jointly agreed an extension to the UK – EU Trade and Cooperation Agreement’s (TCA) Rules of Origin for Electric Vehicles and their batteries, until 31 December 2026.

To access zero tariffs under the TCA, businesses must prove their products include a minimum level of EU or UK manufactured content. These requirements are known as “rules of origin” and help determine where products originate rather than where they are shipped from to ensure lower tariffs are correctly applied to eligible products and support market competition. The TCA included a staged approach for electric vehicles and batteries, which required phased increases in these rules of origin requirements. The first increase was due to take effect on 1 January 2024, before a final increase from 1 January 2027. The agreement with the EU cancelled the 2024 changes, meaning the existing rules of origin will last until the end of 2026.

This extension of the ruleset for these commodities has also been replicated in the UK-Turkey Preferential Trade Agreement. This agreement has been amended by Joint Committee Decision to ensure consistency between the Preferential Trade Agreement and the EU-Turkey customs union.

The agreement avoided a cliff edge which could have seen consumers and manufacturers in the UK and EU hit with £2-4 billion of tariffs (on average over £3,000/car) and safeguards the position of UK manufactures as they transition to net zero – protecting thousands of British jobs. This is a pragmatic change which will help economic growth, UK consumers, and the environment; it recognises the disruption caused by the Covid 19 pandemic, global supply chain pinch points and Russia’s illegal invasion of Ukraine.

This Government is determined to ensure the UK remains one of the best locations in the world to build zero emission vehicles, and we have taken action accordingly. At the Autumn Statement, as part of the Advanced Manufacturing Plan, we announced over £2 billion in capital and R&D investment for the automotive sector to support the manufacturing and development of zero emission vehicles, batteries and supply chain - building on existing support.

The UK and EU remain determined to develop domestic electric vehicle battery capacity, so we have also agreed to remove our ability to further amend these rules of origin again until 2032. In November we published the UK’s first ever Battery Strategy, outlining our plan to attract investment and achieve a globally competitive battery supply chain by 2030.

The UK’s approach has already attracted landmark investments in gigafactories and electric vehicle manufacturing. This includes the recent announcement of a £2 billion Nissan led investment to produce two new electric vehicles in Sunderland, Tata’s investment of over £4 billion in a new 40 GWh gigafactory, BMW’s investment of £600 million to build next generation MINI electric vehicles in Oxford, Ford’s investment of £380 million in Halewood to make Electric Drive Units and Stellantis’ £100 million investment in Ellesmere Port for electric vehicle van production.