Partnership Council confirms one-off extension of the current rules of origin for electric vehicles and batteries

The EU-UK Partnership Council has today adopted a Decision to extend the current rules of origin for electric vehicles and batteries for three years – until 31 December 2026. This follows a proposal by the Commission on 6 December and its adoption by the Council earlier today.

The rules of origin for electric vehicles and batteries under the TCA were designed in 2020 to incentivise investment in the EU’s battery manufacturing capacity. Circumstances not foreseen in 2020 – including Russia’s aggression against Ukraine, COVID-19’s impact on supply chains, and increased competition from new international subsidy support schemes – led to a situation where the scaling-up of the European battery ecosystem has been slower than initially anticipated. It is against this backdrop, and in light of the concerns raised by the European automotive, battery and chemical industries as well as trade unions, that today’s Decision has been adopted.

This is a one-off extension that cannot be prolonged, as the Partnership Council is no longer empowered to modify these rules until 2032. This means that EU industry must now intensify its investments to increase and deepen its battery manufacturing capacities. Furthermore, industry needs to evaluate its supply chains to ensure that vehicles destined for export to the United Kingdom are assembled with EU-originating (or UK-originating) batteries, in order to comply with the rules of origin applicable from 1 January 2027.

In parallel, the EU is stepping up its efforts to support the production and development of more batteries in the EU. This includes the recently announced funding mechansism of up to €3 billion to boost the EU’s battery manufacturing industry. This will create significant spillover effects for the entire European battery value chain, notably its upstream segment, as well as support the assembly of electric vehicles in Europe.

Next steps

The Decision enters into force today. The application of the product-specific rules of origin for electric accumulators and electrified vehicles applicable until 31 December 2023 is extended up to 31 December 2026. From 1 January 2027, the product-specific rules of origin for electric accumulators and electrified vehicles as set out in Annex 3 of the Trade and Cooperation Agreement will apply.

Background

The Trade and Cooperation Agreement establishes the rules governing trade between the European Union and the United Kingdom. Those rules include rules of origin that specify how a product can be considered originating from the EU or the United Kingdom. Only products originating in a Party to the EU-UK Trade and Cooperation Agreement can benefit from the preferential regime established by the Agreement.

The Partnership Council is the Trade and Cooperation Agreement’s highest decision-making body.