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How Would a No Deal Brexit Impact the Electric Car Industry in 2021?

Electric vehicles, which are already priced at a premium when compared to petrol or diesel alternatives, could become almost £3,000 more expensive in 2021 if a Brexit deal can’t be reached.

This is because there will be a 10% tariff placed on all vehicles imported to the UK from the European Union if a deal isn’t concluded.

The Impact

Increasing vehicle costs could ultimately price many interested buyers out and deter them from switching to low-emission models and end the increasing demand for plug-in vehicles.

Although tariffs will apply on regular vehicles as well, the cost will be far greater when considering EV’s due to the fact that they use more complex internal combustion engines.

It’s thought that the motor vehicle industry in the UK could be one of the hardest hit, along with motorists in the market for a new vehicle and the government’s ambitions to become carbon neutral by 2050.

The Society of Motor Manufacturers and Traders Ltd (SMMT) warns, “The immediate imposition of blanket tariffs under World Trade Organisation rules would add billions to the cost of trade and, crucially, to the cost of building and buying electric vehicles.”

These increased tariffs amount to 10% which would add at least £4.5billion to the yearly price of fully assembling vehicles that are traded between the UK and the EU, accounting for an average price rise of £1,900 per electric vehicle sold in the UK from EU manufacturers.

However, new research shows that for electric vehicles fitted with complex battery technology, the cost could creep even higher, to £2,800. This essentially increases the price gap between electric and conventionally powered vehicles even further still.

For example, Jaguar Land Rover – the UK’s largest car manufacturer – retails the battery-powered I-Pace SUV at £64,495. With a price increase of £2,800, this could pretty much render the £3,000 plug-in grant null and void.

The Economy

The overall impact of the increased tariffs could set back the UK’s ambitions to be a worldwide leader in zero-emission vehicle development, production and deployment, which could severely hamper the UK’s industrial competitiveness.

With ministers creating a deadline of 2030 for the banning of petrol and diesel cars with the aim of carbon neutrality by 2050, a renewed set of targets may need to be put in place around electric vehicle sale targets.

Mike Hawes, Chief Executive of the SMMT had this to say, ‘Just as the automotive industry is accelerating the introduction of the latest electrified vehicles, it faces the double whammy of a coronavirus second wave and the possibility of leaving the EU without a deal.

‘As these figures show, ‘no deal’ tariffs will put the brakes on the UK’s green recovery, hampering progress towards net zero and threatening the future of the UK industry.

‘To secure a truly sustainable future, we need our government to underpin industry’s investment in electric vehicle technology by pursuing an ambitious trade deal that is free from tariffs, recognises the importance of batteries in future vehicle production and ensures consumers have a choice in accessing the latest zero-emission models.

‘We urge all parties to re-engage in talks and reach an agreement without delay.’

The Positive News

While the SMMT says that the additional tariffs will see EV prices increase more quickly than petrol and diesel vehicles, a new report from Investment bank UBS reports some more positive news.

The report predicts that the cost of electric cars would gain parity with conventional motors as early as 2024, due to the falling battery costs.

Based on the analysis of batteries produced by seven of the world’s largest manufacturers, the report details that the cost to produce the powerful lithium-ion batteries as compared to their fossil fuel counterparts would shrink by $1,900 (£1,470) per car by 2022.

Two years later, it’s thought that EV’s will be inline from a cost perspective with traditional vehicles, which will bring an end to almost a decade of EV’s retailing at a significant premium.

 

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