EU and UK Move Toward Second Delay of EV Rules of Origin

A 10 per cent tariff on EU–UK electric vehicle trade, scheduled to bite from 1 January 2027, now looks likely to be postponed again. According to the Financial Times, citing multiple sources familiar with the matter, the European Commission is consulting industry on delay proposals, and the UK government reportedly supports a postponement.

The tariff stems from the rules of origin agreed in the Brexit trade deal. These rules require a rising share of value added for EVs and batteries to come from the EU or UK. The current transitional rules expire at the end of 2026. From 2027, at least 55 per cent of vehicle value must originate in the region. The threshold rises to 65 per cent for battery cells and modules (the core electrochemical building blocks of a pack) and 70 per cent for battery packs. Vehicles missing these targets face the 10 per cent duty.

What does the tariff actually cost?

The trade exposure is concentrated and quantified. The UK builds vehicles such as the Nissan Leaf and several electric Stellantis vans largely for EU export, while the EU ships a wide range of EVs into the UK.

ACEA, the European manufacturers' association, estimates around 520,000 electric cars and vans will move from the EU to the UK in 2027, worth €17.9 billion. It calculates that roughly 82 per cent of those — about 426,000 vehicles — would fail the stricter rules, adding around €1.47 billion in tariff costs for 2027 alone. Manufacturers also fear the duty would hand Chinese competitors an edge in the UK market.

What is on the table in Brussels?

ACEA proposed a staggered delay in September. Its plan would keep the current requirement — battery pack assembly in the EU or UK suffices — until the end of 2029. From 2030, battery cells would also have to come from the region. For active cathode materials (essential components of a battery cell's positive electrode), the requirement would only apply from 2032.

The Financial Times reports the Commission is weighing shorter transitions. At least two options are under discussion:

• A simple one-year delay of the 2027 rules.
• A two-year offsetting mechanism letting manufacturers sell non-compliant vehicles with third-country batteries in export markets, balanced by compliant models in their home markets.

One industry representative described the offsetting model to the Financial Times as unusual but potentially workable. No decision has been made.

Who is pushing back?

The European chemical industry opposes any further delay. Companies have already invested heavily in European production of active cathode materials and fear a postponement would defer demand for their output. The Commission faces a direct conflict: the rules exist to pull investment into European battery supply chains, yet they threaten automakers with near-term competitive damage.

The UK side wants a pragmatic outcome. SMMT, the UK industry association, points to an estimated €72 billion invested in battery and EV production facilities since 2017 — while the UK still imports around two-thirds of the lithium-ion batteries it needs. SMMT CEO Mike Hawes said: "The UK and EU are bound by €80 billion in annual automotive trade and millions of jobs." He called for a pragmatic solution for 2027 rules and more integrated supply chains.

A package deal is in play

Both sides have delayed once before. At the end of 2023, Brussels and London pushed the original 2024 start back to the end of 2026, explicitly ruling out further delays at the time. Serious negotiations on another postponement are expected after the EU–UK summit on 20 November, the Financial Times reports.

A wider bargain may be attached. Under the EU's Industrial Accelerator Act, the planned 'Made in Europe' policy would prioritise EU products in public procurement and state funding, including for EVs. The Commission and the UK could combine a tariff delay with equal UK treatment under those rules. The minister-presidents of Baden-Württemberg, Bavaria and Lower Saxony have already urged extending 'Made in Europe' beyond the EU to the UK, the EEA and EFTA states (Iceland, Liechtenstein, Norway and Switzerland) and other established partners.

What to watch next: the Commission's choice between a flat one-year delay and the offsetting mechanism, the reaction of cathode-material producers, and whether the 20 November summit opens the door to a package covering both tariffs and 'Made in Europe' access.