The UK automotive sector continues demonstrating remarkable resilience, generating £115 billion in trade five years after Brexit. This impressive performance comes despite significant challenges including new tariff barriers and geopolitical tensions.
UK Automotive Sector Trade Performance
The Society of Motor Manufacturers and Traders reports consistent strength. The industry achieved over £110 billion in trade for three consecutive years. Furthermore, European trade remains crucial with £68.4 billion flowing across the Channel.
Electric Vehicle Revolution
Electrified vehicles drive unprecedented growth. Cross-border EV trade surged 424% since 2019. UK-made hybrid and EV exports to the EU now outweigh combustion models two-to-one. This shift represents a fundamental transformation.
Looming Battery Rules Challenge
Stricter rules of origin for EV batteries take effect January 2027. These requirements demand higher local production levels. However, battery supply chains currently lag behind demand. Potential tariffs range from 10% to 22%.
Industry Recommendations
The SMMT urges immediate government action. Key recommendations include:
- Clearer cathode material definitions
- Re-joining PEM Convention
- Stronger EU trading relationships
Competitive Pressures Intensify
Global competition increases significantly. Protectionism and geopolitical tensions create additional hurdles. Customs requirements and regulatory divergence add substantial costs. Manufacturers face billions in electrification commitments.
Future Outlook
With 16 months until deadline, urgency grows. Political action becomes essential for maintaining competitiveness. The UK risks undermining its automotive trade leadership. Net-zero ambitions also face potential setbacks.
Frequently Asked Questions
What is the current trade value of the UK automotive sector?
The sector generated £115 billion in imports and exports last year, maintaining over £110 billion for three consecutive years.
How has Brexit affected automotive trade with Europe?
Despite new barriers, Europe remains the UK’s largest trading partner with £68.4 billion in automotive trade and over half of UK-built cars exported to the EU.
What are the rules of origin requirements for EV batteries?
Starting January 2027, stricter rules require higher levels of local production for batteries and components, with potential 10-22% tariffs for non-compliance.
Why are battery supply chains not ready?
Battery production lags behind demand despite recent gigafactory investments in Somerset and Sunderland, creating supply chain challenges.
What solutions does the industry propose?
The SMMT recommends clearer battery component definitions, rejoining the PEM Convention, and strengthening EU trading relationships.
How does this affect consumer EV prices?
If tariffs are applied, electric vehicles could become uncompetitive compared to petrol and diesel models that enjoy 0% tariffs.
