European Council rubberstamps RoO delay

The EU's Council of Ministers has, as expected, approved a proposed delay to changes to the rules of origin (RoO) for EV and battery components under the EU-UK Trade and Cooperation Agreement (TCA), after the Europeam Commision greenlighted the extension in early December.

The Council says it has "adopted a decision which will allow the EU to agree with the UK on the extension of the current rules of origin for electric vehicles and batteries until December 31 2026," explaining that "this will prevent the entry into force of more stringent rules from January 1 2024 and the application of a 10pc tariff on goods traded between the EU and the UK which do not meet those requirements".

The RoO dictate the sourcing requirements that EV manufacturers must meet to be able to trade between the EU and UK without tariffs. To qualify for zero tariffs, at least 55pc of the value of an EV needs to be from the EU or UK. 65pc of a battery's value and 70pc of the value of battery packs must in addition be sourced from the EU or UK.

"Today the Council approved a proposal to give manufacturers of electric vehicles in the EU and the UK more time to comply with the local content requirements for electric vehicles and batteries under the EU-UK Trade and Cooperation Agreement," the European Council says.

The Council says that it expects the European auto industry to be able to adapt to the higher local content requirements by 2027, primarily through expanding battery production. As such, the Council has also agreed with the Commission that "support in the order of €3bn will be provided for this purpose under the innovation fund".

"The extension of the current rules of origin is complemented by a lock-in mechanism, meaning that once the full regime for local content requirements under the TCA begin in 2027, no changes will be possible until 2032," the statement adds.

The decision to delay implementing the tighter rules of origin was first proposed in early December and was met with support from automotive lobby group the European Automobile Manufacturers’ Association, or Acea.

Acea's UK counterpart organisation, the Society of Motor Manufacturers and Traders (SMMT), has also welcomed the news, with its CEO Mike Hawes saying that the decision will "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".

"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," Hawes says.

“The long-awaited deal to extend rules of origin by three years provides much-needed certainty to Europe’s growing electric vehicle battery supply chain," notes Sigrid de Vries, director general of Acea.

"Instead of penalising green industries, today’s decision is recognition that it takes time to build up emerging value chains,” de Vries adds.

The proposed deferral will now be voted on by the EU-UK Partnership Council, which has been set up under the EU-UK Trade and Cooperation Agreement, before the end of the year.