German automakers warn of tough EU talks on post-Brexit EV trade

Germany's automaking lobby warned of difficult discussions with the European Commission to reshape incoming trade rules between the U.K. and the European Union that threaten to make electric vehicles more expensive.

From next year, 45 percent of an electric vehicle’s value must be sourced in the U.K. or elsewhere in Europe to avoid export tariffs of 10 percent.

The industry will not be ready to meet this threshold because Europe's battery supply chain is still ramping up, according to the VDA lobby, which represents German automakers including Volkswagen and BMW.

"We don't have enough batteries here to fulfill these rules," VDA President Hildegard Mueller said on Wednesday in an interview with Bloomberg Television. "We are having difficult talks and we are working to inform about the consequences."

Carmakers including Stellantis, which owns the UK Vauxhall brand, Ford and Mercedes-Benz have warned about the detrimental effect of the post-Brexit trading arrangements.

Nissan, the U.K.'s largest automaker by volume, has said building cars in Britain may become too expensive after the rules kick in.

While the U.K. is a significant vehicle exporter, it's also a lucrative market for cars made in the EU.

The British government has asked for a delay of the terms under the post-Brexit Trade and Cooperation Agreement to 2027, by which time battery makers such as Northvolt and Contemporary Amperex Technology Co. with sites in Sweden and Germany are set to be up and running at scale.

ACEA, the European auto industry lobby group, estimates that EU-based companies will pay 4.3 billion euros ($4.7 billion) in tariffs and lose sales between 2024 and 2027, director-general Sigrid de Vries told the Financial Times.

Last month, several EU officials with knowledge of the talks said there has been no major breakthrough so far, following comments by U.K. Business and Trade Secretary Kemi Badenoch of an imminent resolution.