Badenoch pushes back on EV target as Barnier plays down possibility of 'cliff edge' compromise

Wed 2 Aug 2023
Posted by: Phillip Adnett
Trade News

Car production line in factory

The government is considering watering down a target for the production of electric vehicles, citing industry concerns that it might harm UK jobs and investment.

This development comes as a senior EU official suggested there is limited room for manoeuvre on an impending tariff ‘cliff-edge’ for auto-manufacturers.

ZEV mandate

Business and trade minister Kemi Badenoch has told the cabinet colleagues that a proposed electric vehicles target for the automotive industry could harm domestic car production.

Under draft plans for the zero emissions vehicle (ZEV) mandate, slated to begin in 2024, a fine will be applied to manufacturers unless at least 22% of vehicles they produce are electric.

This fine can be as high as £15,000 for every non-compliant car sold. The target would rise each year, hitting 80% by 2030.

“If major car companies employing thousands of people are saying that there’s a problem, then it’s her job to look at ways to ease that problem,” a spokesman for Badenoch told Politico.

Electric cars

Despite record numbers of electronic vehicles being produced in July, industry figures are still said to be sceptical of the targets.

Toyota and Honda are two of the major producers that raised issues previously, as reported by the Telegraph, questioning both the timeframe and whether the UK had the infrastructure in place to support electric vehicle use.

A spokesman for Honda said that meeting the mandate would be “challenging” but highlighted that they were not opposed to the concept of ZEV, but rather the relatively short deadline imposed on manufacturers.

Cliff-edge still looming

News of Badenoch’s concerns comes after data released last week by the Society of Motor Manufacturers and Traders (SMMT) showed that the UK produced a record number of electric vehicles in the first half of 2022, with a great deal of these being exported to the EU.

However, producers of electronic vehicles are still facing a looming tariff ‘cliff-edge’ on the import of car parts contained in the UK-EU Trade and Cooperation Agreement (TCA).

As reported previously by the IOE&IT Daily Update, origin rules contained in the TCA could make it difficult for manufacturers to source parts from outside of Europe, with rules set to tighten next year and in 2027.

Although industry figures on both sides have been pushing for the TCA to be modified, there appears to be limited room for manoeuvre. Michel Barnier, the EU’s former chief Brexit negotiator, told Politico that it was unlikely that the rules could be modified before a formal review of the TCA, which is expected in 2025.

Barnier said he thought there was currently “no way to do more flexibility” on this.

Net zero row-back

The internal cabinet debate over the ZEV mandate comes as the government appears to be considering pulling back on environmental and sustainability commitments.

As reported by the Guardian, ZEV is part of a wider push towards a complete ban on any new diesel or petrol cars being sold in the UK by 2030.

Although the government still says it supports this 2030 goal, prime minister Rishi Sunak recently issued a slew of announcements that appear to be at odds with the net zero commitments. This includes fresh oil and gas licensing in the North Sea, a review of low traffic neighbourhoods and a delay of a scheme aimed at encouraging manufacturers and importers to take responsibility for the environmental impact of their goods.

The latter is described as an effort to combat inflation by reducing costs on consumers, but some observers have suggested this is part of an effort to shore up political support, after a narrow but unexpected win in the recent Uxbridge and South Ruislip by-election.