EU Grants Electric Vehicle Makers Extension Until 2026 to Meet Local Content Rules

The European Union Council approved a proposal to extend local content restrictions for EU and UK electric vehicle (EV) manufacturers until 2026.

This major move by the EU's top decision-making body delays the imposition of post-Brexit tariffs on EVs sold between the EU and the UK, scheduled to take effect on January 1, according to Automotive News Europe.

As Britain and the EU stand as each other's principal markets for EV exports, the extension seeks to ease the path to compliance, fostering the growth of EVs as an environmentally conscious substitute for traditional internal combustion engine vehicles.

A Relief for the EV Sector

The EU's initial plan was to impose a 10 percent duty on EVs moving between the UK and the EU if less than 45 percent of their value originated from the respective region. This policy aimed to stimulate the development of Europe's battery supply chain.

However, challenges arose from automakers, citing concerns over the lack of preparedness in local battery cell supply. Critics contended that the proposed tariffs would disproportionately favor external competitors, particularly Chinese automakers experiencing a surge in exports to Europe.

Comprising 30 to 40 percent of a vehicle's overall value, batteries are predominantly procured from China. In response, European automakers contended that adhering to the stipulated local content requirements would pose significant challenges given their reliance on Chinese sources for this essential automotive component.

UK PM Sunak Lauds The EU Decision

The decision to extend the compliance deadline was proposed earlier this month and gained formal approval from the EU Council on Thursday. British Prime Minister Rishi Sunak expressed relief for the industry, stating, "We have been listening to the concerns of the sector throughout this process, and I know this breakthrough will come as a huge relief to the industry," as quoted by XM.

Sunak further commented: "We are exhaustively exploring every avenue to strengthen our domestic battery industry, providing enduring certainty for our flourishing automotive sector, and supporting its expansion within the UK."

Major automobile companies, notably Fiat-owner Stellantis, warned of plant closures if the laws were applied as planned in 2024. The Society of Motor Manufacturers and Traders (SMMT), a UK automotive industry trade group, praised the extension for its benefits to carbon reduction, economic development, and employment support.

In addition to the EU-UK agreement, Britain is pursuing a three-year extension to equivalent rules with Turkey to provide added support for UK car companies, significant exporters to the Turkish market, per CNA.

According to the Council, Europe's auto industry is expected to adapt to the heightened local content requirements by 2027, primarily through an expansion of battery production for EVs. The statement revealed that financial support of 3 billion euros would be allocated to facilitate this transition.