“At the moment, there are negotiations between the U.K. and the EU around how you define that and what the maximum levels of non-originating material for different parts of the battery could be,” they said.
London and Brussels are holding technical conversations about at what point in the supply chain firms can mix the different elements that go into the battery to count towards local content, the person added.
Lobbying fight
The discussions will lead to a lobbying “battle” between the chemicals and automotive sectors as each vies to have more or less Chinese manufacturing in the supply chain, the senior European business representative said.
Meanwhile, some automotive firms won’t be able to meet the requirements, they said, although this would depend on their market position and the supply chains of individual automakers.
“Everyone is aware that the battery supply chain hasn’t localized as fast as people hoped,” the senior auto industry figure said, noting that battery companies like Britishvolt have collapsed and other investments have been canceled.
To avoid tariffs on the trade in EVs between the EU and the U.K., governments in both London and Brussels “need to work with industry to agree a reasonable definition of what constitutes an originating cathode active material,” the U.K.’s Society of Motor Manufacturers and Traders set out in a report last year.
But this is all “tinkering” that won’t resolve the key issue of duties making EVs more expensive, the auto industry figure said. “There’ll be more clarity but, ultimately, people are not going to be compliant across all of their vehicle lines by Jan. 1, 2027.”
This story was updated to include a response from the European Commission.