A major new announcement has confirmed that tariffs on electric cars from next year will be avoided after the UK and EU agreed to extend trade rules.
The Prime Minister has announced that the UK and European Union have decided existing regulations will continue until the end of 2026.
Rules of origin requirements would have been introduced on January 1 after post-Brexit negotiations, although this has now been paused.
It would have seen tariffs of 10 per cent imposed on car sales between the UK and the European Union if at least 45 per cent of the vehicle’s value did not originate in the UK or EU.
The new rule changes will apply for three years from 2027
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Previous estimates from the Society of Motor Manufacturers and Traders (SMMT) found that drivers would have seen the price of EU-made electric cars increase in price by £3,400 had the 10 per cent applied.
The price of British EVs sold in Europe would have seen a price hike of £3,600, making the UK automotive industry uncompetitive and potentially leading to a collapse.
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.
Rishi Sunak said: “We have been listening to concerns of the sector throughout this process and I know this breakthrough will come as a huge relief to the industry.
“The UK Government is delivering a pragmatic solution to keep costs down for businesses and for people at home who want to make the switch to electric vehicles.
“We are also leaving no stone unturned to bolster our domestic battery industry and deliver long-term certainty for our thriving automotive sector to help them grow their roots in the UK.”
Under the existing Trade and Cooperation Agreement, a staged approach was introduced for electric vehicles and batteries and gradually allow the UK and EU to manage the tariffs.
The new law changes will help save UK manufacturers and consumers up to £4.3billion in additional costs, as well as providing long-term certainty to the sector.
Business and Trade Secretary Kemi Badenoch said the Government was determined to make the UK as attractive as possible to potential investors, as evidenced by the new rules.
The MP for Saffron Walden added: “Resolving issues like this one is part and parcel of being an independent trading nation. This very good result is a visible demonstration that the UK is delivering for business with trading partners around the world.”
The SMMT has repeatedly called on the Government to introduce new laws to prevent motorists from bearing the brunt of expensive EV costs.
Mike Hawes, Chief Executive of the SMMT, said: “Deferring the rules of origin is a win for motorists, the economy and the environment.
“Maintaining tariff-free trade in EVs will ensure consumers retain the widest and most affordable choice of models, at a time when we need all drivers to make the switch.
“Governments have listened to the sector and acted to safeguard the competitiveness of the EU and UK automotive industries and give the Anglo-European battery industry the critical time it needs to catch up.
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Rishi Sunak praised the move, saying it would be positive for the automotive industry
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“The measure will help cut carbon, support growth and jobs, and is the right decision for the decarbonisation of road transport."