Concerns remain about the UK’s working relationship with the European Union to “fix the specific issue” which could see electric cars traded between Britain and the bloc face huge tariffs.
The UK and EU have been locked in negotiations over the past few months to avoid a deadlock which would see drivers and manufacturers pay more for electric vehicles.
The Society of Motor Manufacturers and Traders (SMMT) warned that electric cars could cost £3,400 more for drivers if the rules of origin are implemented in January.
Tariffs of 10 per cent would also add £3,600 to the cost of British EVs sold in Europe, potentially making the UK car industry uncompetitive and potentially collapse.
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Under the post-Brexit trade deal, electric vehicles are required to have 45 per cent of their content to be made in the UK or European Union.
This is in addition to a 50 to 60 per cent requirement for their battery cells and battery packs.
If this is not adhered to by manufacturers, they could face enormous British or European Union import tariffs.
Exports minister Lord Offord of Garvel responded to a written question from Lord Taylor of Warwick, blaming “unforeseen shared external shocks”.
Despite this, Lord Offord, who is also the Parliamentary Under-Secretary of State for Scotland, said the UK and EU were working together to resolve issues.
He added: “Due to unforeseen shared external shocks, carmakers across Europe have said they cannot meet the UK-EU Trade and Co-operation Agreement’s rules from 2023 and could face tariffs.
“This is a shared problem and the Government is determined to work with the EU to fix the specific issue faced from 2024.
“We want to reach a joint solution with the EU, but our priority is to support our automotive sector and we will be considering all scenarios,” PA reported.
The automotive industry has called on the UK and EU to delay the new rules of origin requirements to 2027.
The SMMT warned that if the new rules were to be rolled out in January 2024, competitiveness, the EV transition and net zero ambitions at risk.
Lord Offord of Garvel said the Government was continuing to support the UK motoring industry through the Automotive Transformation Fund.
He added that this was creating an “internationally competitive UK electric vehicle supply chain”.
It has been predicted that the impact of the electric vehicle rules of origin could result in manufacturers facing a £4.3billion bill.
Mike Hawes, chief executive of the SMMT, said: “Our manufacturers have shown incredible resilience amid multiple challenges in recent years, but unnecessary, unworkable and ill-timed rules of origin will only serve to set back the recovery and disincentivise the very vehicles we want to sell.