UK EV industry floats post-2027 extension of TCA rules of origin deadline

The unforeseen impacts of the pandemic, energy price crunch and soaraway inflation see influential voices call for flexibility in full imposition of EU battery rules.

A likely shortfall in UK battery-making capacity risks British-made EVs being locked out of tariff-free access to the EU market when full rules of origin as per the post-Brexit Trade and Cooperation Agreement (TCA) come into force in 2027. And the problem is so acute that UK industry figures argued this week to a parliamentary committee that the country should seek a postponement of full implementation.

From 2027, the UK can export EVs into the EU at a zero tariff only if they contain 55pc UK or EU content and a battery pack originating in either. The originating battery pack must have either 65pc UK or EU content for the cell or 70pc for the battery pack. The stepped approach on rules or origin for EVs kick in from 2024.

“It will be a massive challenge,” Ian Constance , CEO of the Advanced Propulsion Centre UK , a University of Warwick-based non-profit focused on low-carbon emission powertrain technologies, told the Business and Trade Committee. “Over the next few years, there will be a lack of supply.

“We have seen the battery industry grow significantly in Asia. So, a lot of supply is still coming from there, which means that people are going to need to quickly work out where they get local battery materials from, because that battery element is going to be fundamental,” Constance continues.

“The next piece of it is going to be cathode active material, which there is a massive shortfall of in Europe. It is going to be billions of pounds-worth of investment over he next few years to bring that together,” he concludes.

“The demand for electric vehicles is growing exponentially, almost, and the supply chain across the whole of the EU is playing catch-up whether it is gigafactories or whether it is the raw materials that go into them,” agrees Alan Hollis , CEO of UK battery manufacturer AMTE Power . “My biggest concern is that, with a lack of cathode active capacity in particular, it is going to be very, very difficult for us to comply fully with the rules or origin.”

And he suggests that potential renegotiation of TCA terms “really does need to be” on the UK political agenda. “We have to take into account the measurable gap between what the production capacity is and what the demand is,” Hollis contends.

Stephen Gifford , chief economist at research institute the The Faraday Institution , offers what he terms a “concrete suggestion” for a UK negotiating position. The rules of origin were created in 2020, before the Covid-19 pandemic, an energy price spike and runaway inflation roiled the European and global economy, and such circumstances were not envisaged when the TCA was being developed.

“As a minimum, I would suggest an increased length of time for the transition period,” says Gifford. “Pushing [full implementation] back one or two years would give everyone breathing space.”

The 2027 deadline is “going to be a stretch”, Constance agrees. “We need to have a discussion with the battery and supply companies. But, as a minimum, a delay is what the industry would expect.”

But a simple postponement may not be sufficient in itself. “We need to make sure we are looking at the joined-up picture,” cautions Hollis, “so that we can make sure, when we are asking for delays in the implementation of the legislation, that we are quite confident that we have the right numbers in front of us.” An end-to-end industrial strategy, encompassing not just gigafactories but all elements of the supply chain upstream of these facilities is “absolutely key”, in Hollis’ view.

The problem is, according to Advanced Propulsion Centre figures, a Europe-wide issue, which may mean the EU is amenable to any UK calls for postponement. Its latest report highlights a 50pc shortage in anode materials across the UK and Europe, and a 25pc deficit on cathode materials.