Acea ups urgency on ROO delay plea

Mobility lobbying group reiterates its call for a longer grace period as deadline looms larger

Acea ups urgency on ROO delay plea
Internal market commissioner Thierry Breton told a UK newspaper he was against any TCA exceptions

The European Automobile Manufacturers Association, or Acea, is again asking the European Commission to “act now” in postponing the introduction of stricter rules of origin (ROO) from 1 January, amid reports of a split between European officials on the issue.

The ROO are included in the Trade and Cooperation Agreement (TCA) between the UK and the EU, as a result of the country’s decision to leave the blocafter its 2016 referendum. Under the TCA, the UK is temporarily exempt from the standard ROO for vehicles, which is either 40pc or 45pc non-originating content (NOM).

Given the relative value of a battery in a motor vehicle — 30-50pc depending on the type, size, and value — if a battery is designated non-originating, it is "almost impossible", Acea says, for European manufacturers and exporters to meet the rule.

In the current first transitional period of the TCA, the ROO require only that batteries be assembled in Europe, so all batteries made in Europe qualify as originating. This rule will apply until 31 December 2023, and c.99pc of EU-made EVs are compliant.

But from 2024 until the end of 2026, there will be a second transitional period with what Acea warns are “significantly more restrictive rules”. These will require all battery parts and certain battery materials to originate in Europe. Currently, Acea estimates only c.10pc of EU-made EVs would comply next year and 30pc by 2026.

Acea argument

“Driving up consumer prices of European electric vehicles, at the very time when we need to fight for market share in the face of fierce international competition, is not the right move — neither from a business nor an environmental perspective,” says Luca de Meo, Acea president and CEO of French OEM Renault Group. “We will effectively be handing a chunk of the market to global manufacturers.”

According to Acea data, more than one in 10 EU-made cars exported to the UK in 2022, a total of 1.1mn units, were BEVs, worth €5.1bn ($5.4bn). The EU’s share of the UK BEV market has been increasing — from 44pc in 2019 to 47pc in 2022.

But China’s share of the same market has been increasing much more rapidly over the same period, from c. 2pc almost 32pc. So there are obvious reasons why EU OEMS are alarmed by greater barriers of entry for them into a material EV export market.

Political stasis

There is nothing particularly new in Acea’s warning. Its estimates that introducing the new rules at the start of 2024 — rather than the beginning of 2027 as it suggests — will cost EU vehicle makers €4.3bn in UK custom duties over the next three years and also potentially reduce EV production in  the EU by some 480,000 units are the same as in a June letter to the Commission, which followed an initial letter the previous month.

What has changed is, first, the growing proximity to the end-of-year deadline. The second is reported splits among European officials.

German policymakers are said to have been won over by industry lobbying and are prepared to support a postponement. But French internal market commissioner Thierry Breton was quoted by the UK’s Guardian newspaper last week as being opposed to giving EVs any sort of special carveout from the TCA rules.

The UK government said in mid-July that it was talking to the EU on the issue, but offered no hint at that stage that a deal was imminent. The UK industry has been calling for action since at least early May.

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