Electric car prices set to rise by 10% from 2024

Many electric vehicles made and sold in the UK and Europe will become more expensive from 2024, slowing price parity with petrol and diesel cars, it has been found.

Manufacturers of battery-only cars have warned they will have to raise prices by 10 percent or more in just over 12 months due to the introduction of trade tariffs.

It comes after Brussels said it has no intention of extending an exemption agreed in the Brexit trade deal that expires at the end of next year.

The trade and cooperation agreement has exempted all electric vehicles from rules that state they must be largely made in Britain or the bloc to qualify for the EU’s zero rate.

The exemption expires at the end of 2023, with electric vehicles between Britain and the EU that do not meet the criteria of the agreement then forced to pay 10 per cent tariffs.

This includes the batteries, where more than half the value of the components must come from the EU or the UK to avoid the 10 percent levy.

Most electric cars on sale today use batteries sourced from the Asian market, which means they will not meet the zero-tariff requirements set by Brussels.

With few battery-producing gigafactories in Europe – and none currently in the UK – this is likely to remain the case until later in the decade.

About a dozen battery factories are expected to open across Europe before 2030. Only one gigafactory is currently being built in the UK, with others facing an uncertain future due to financial difficulties.

According to reports in the Financial timesautomotive trade associations – including the UK’s Society of Motor Manufacturers and Traders (SMMT) – have asked for the electric vehicle exemption to be extended beyond December 31, 2023 due to the lack of available indigenous batteries.

If an extension is not granted, it would be the car manufacturers who would have to deal with the 10 per cent tariffs on electric cars crossing the Channel – and these increases will almost certainly be passed on to consumers via higher prices.

This is likely to prevent electric vehicles from reaching price comparison with gasoline and diesel equivalents for the next five years.

While battery-powered cars remain more expensive than a comparable internal combustion engine alternative – up to £10,000 in some cases – reports suggest that prices will fall over the coming years and electric vehicles will be cheaper to produce by 2027.

Estimates last year by BloombergNEF, a strategic research firm specializing in electric vehicle analytics, said production costs for electric family cars and SUVs will be lower by 2026, with battery-powered superminis and city cars set to be cheaper to make than gasoline-powered from next year. and diesel cars.

BloombergNEF estimated that electric SUVs will be cheaper to produce than petrol and diesel equivalents by 2026, while battery superminis will be cheaper from next year

However, if the tariff exemption in the trade and cooperation agreement is not renewed, this price parity date would likely move closer to 2030, when the ban on the sale of new petrol and diesel cars takes effect in Britain.

Under the agreement, to qualify for tariff-free trade from 1 January 2024, at least 45 percent of an electric vehicle’s value must come from the EU or the UK, and 50 to 60 percent of its batteries.

Dr. Andy Palmer, former CEO of Nissan and Aston Martin, tweeted last week: “I have warned that the rules of origin of the Brexit trade deal could have devastating consequences for the car industry.

“It appears those warnings have not been heeded and we are heading for massive post-2024 disruption. Shame.”

Mike Hawes, the CEO of the SMMT, told the FT that the UK trade body supports the extension request because there is not enough battery production capacity in the UK or Europe.

Construction of the Envision AESC battery factory in Sunderland started last week

Coincidentally, construction began on one of Britain’s gigafactories last week.

Envision AESC has begun work on its factory near Nissan UK’s car manufacturing site in Sunderland, which is part of a wider £1 billion partnership with Nissan and Sunderland City Council.

However, battery production will not start there until 2024.

Meanwhile, the much-anticipated first battery-making gigafactory to be built in Blyth, Northumberland, has run into financial difficulties in recent months.

There has been widespread concern over the future of Britishvolt’s battery plant since reports in November that it was about to go administrative.

It was promised up to £100 million in funding from the UK government but has failed to meet the terms of the agreement to release the money.

Britishvolt’s near-term future was secured by a funding injection – presumably from existing investor Glencore – but this is thought to be just to give additional time to find a suitable buyer for the site.

Britishvolt was poised to go into administration last month, with growing concerns over the future of the proposed gigafactory to be built at Blyth