In brief
Worries over EU trade rules have surfaced as the UK seeks to rebuild its auto industry, particularly its electric vehicle (EV) production. The Society of Motor Manufacturers and Traders (SMMT) warns that the EU’s “Made in EU” proposal and stricter rules of origin could exclude UK-built cars from its market and trigger sizeable tariffs. The impact could ripple across the industry, undermining the UK’s environmental commitments and international investment.
EU trade measures could hamper the UK’s planned recovery in vehicle production, according to the Society of Motor Manufacturers and Traders (SMMT). The society warned on Oct. 29 that the EU’s “Made in EU” proposal, if enacted unchanged, could effectively bar UK‑built cars from its market, and that tougher rules of origin under the 2027 Trade Cooperation Agreement could cost the industry £1.4 billion annually in tariffs for two‑way EV trade.
Industry outlooks released that same week predict a dip in British vehicle production this year, with a projected rise to 752,000 units—mostly electric—by 2027. SMMT data show more than three‑quarters of UK vehicle output in September shipped abroad, with the EU receiving 57.5 percent of those exports. The potential tariff burden and market exclusion, therefore, would hit the heart of an industry already pivoting to cleaner mobility.
The “Made in EU” proposal, which requires a higher percentage of vehicle components to be sourced within the EU to qualify for trade privileges, could place UK‑built cars outside the scheme if they fail to meet the threshold. SMMT’s analysis indicates that, in its current form, the proposal could effectively exclude many British vehicles from EU market access, a risk that is especially acute for the rapidly expanding EV segment.
Meanwhile, the stricter rules of origin scheduled to take effect in 2027 would add annual tariffs totaling about £1.4 billion for EVs traded between the UK and the EU under the Trade Cooperation Agreement. That would not only raise costs for UK automakers but also raise prices for consumers, potentially stalling the uptake of new zero‑emission vehicles.
The SMMT stressed that both measures would damage the automotive industry on both sides of the Channel. It said the EU‑UK Summit, which is upcoming in the new year, is a “vital opportunity to agree pragmatic solutions and safeguard an 80‑billion‑euro trading relationship.”
"We call the forthcoming EU‑UK Summit a vital opportunity to agree pragmatic solutions and safeguard an 80‑billion‑euro trading relationship," the SMMT said.
Beyond trade policy, the society flagged the country’s domestic EV sales targets as unrealistic, adding pressure on manufacturers to restructure at the expense of profitability. This, they argue, could divert resources and erode the UK’s appeal as an investment destination for Green technology.
The potential twin shocks of external trade barriers and internal market pressure pose a threat not only to the UK’s automotive economy but also to its broader climate commitments. The UK has pledged to phase out internal combustion engines by 2030, with a sharp increase in EV production planned to meet carbon‑reduction targets. If the industry’s growth stalls, the country risks falling short of its 2035 net‑zero goal.
Industry leaders and policymakers are urged to consider a series of mitigation strategies: negotiating a revised “Made in EU” arrangement that recognises UK‑built EVs, securing tariff‑free access under a new trade pact, and tempering domestic sales targets with realistic growth frameworks. Such steps would protect the investments that underlie the UK’s transition to a cleaner transport system, benefitting both the economy and the environment.
