Electric vehicles, which are already priced at a premium compared to petrol and diesel cars, would become £2,800 more expensive on average next year if a deal can’t be found with the European Union, a trade body has warned.
A rise would be unavoidable as a result of 10 per cent tariffs being placed on all vehicles imported to the UK from the EU if the Government doesn’t hash-out a deal with Brussels before the end of the transition period.
Increased vehicle costs would ultimately price many potential buyers out of switching to low-emissions cars and burst the recent boom in demand for plug-in models, the Society of Motor Manufacturers and Traders claims.
However, a separate report has suggested any increase in prices as a result of a Brexit no-deal would be in-line with those felt on petrol and diesel models in less than half a decade after calculating that there will be price parity as early as 2024.
Is an EV price hike coming in 2021? The Society of Motor Manufacturers and Traders said failure to secure a trade-free deal with the EU will see the price of imported battery cars rise
The SMMT has previously said the average cost of new cars shipped from EU nations to the UK would become £1,900 pricier from 1 January if trade-free tariffs are not agreed.
However, it has now said the impact would be far greater for buyers of electric cars, which are currently more expensive than an equivalent motor with an internal combustion engine if the UK and EU can’t find a common ground as talks recommence this week.
The trade body has urged both sides to ‘re-engage with vigour’ in the Brexit negotiation process, not only for the automotive sector but for ‘hopes of a green recovery from the coronavirus crisis’.
Government officials said on Monday that time was very short to ‘bridge the significant remaining gaps on key issues’ in talks with the European Union, as EU chief negotiator Michel Barnier heads to London to continue negotiations.
The organisation said a no deal would be the worst possible outcome for the sector, car buyers and the UK’s ambitions to become a world leader in transport decarbonisation.
‘The immediate imposition of blanket tariffs under World Trade Organisation rules would add billions to the cost of trade and, crucially, to the cost of building and buying electric vehicles,’ it warned.
The 10 per cent WTO tariff would add at least £4.5billion to the annual cost of fully assembled cars traded between the UK and the EU, with an average hike of £1,900 per EU-built vehicle sold in the UK.
However, new analysis shows that for fully electric cars fitted with expensive battery technology, the cost increase is even higher, at £2,800, effectively increasing the price gap between them and conventionally-powered vehicles.
Currently, a new Volkswagen Golf with a petrol engine costs from £20,280.
The cheapest ID.3 – VW’s new comparatively-sized electric family hatchback – costs from £29,990.
The entry level VW Golf (left) currently costs from £20,280 while the cheapest ID.3 electric hatchback is almost £10,000 pricier, even when buyers use the £3,000 Plug-in Car Grant
Similarly, Jaguar Land Rover – the UK’s biggest car maker – charges £64,495 for its battery-powered I-Pace SUV, while a comparable F-Pace with a petrol powerplant starts at just under £45,000.
A £2,800 price increase would also make the £3,000 plug-in car grant available to buyers of pure electric vehicles almost null and void.
Car manufacturers have widely said they have no intention to absorb the increased cost of tariffs to bring EU-built vehicles to the UK, instead passing the higher charges directly to customers in their showrooms.
But by making electric vehicles even more expensive, it could create a roadblock for the recent boom in demand for EVs seen in 2020, the SMMT warned.
By the end of September, demand for pure electric cars has risen 165 per cent year-on-year with some 66,611 registered in the first nine months of 2020 – which is almost double that of full-year EV sales in 2019.
Battery electric vehicle demand is up 165% so far in 2020. However, the SMMT said increased vehicle prices could kill the surge in demand
Moreover, a tariff would also add some £2,000 on to the average cost of UK-built battery electric cars exported to the EU, making our own products less competitive and the UK far less attractive as a manufacturing investment destination.
Second-hand EV values are already on the rise
Britons are embracing electric cars more than ever before, with the 165 per cent urge in registrations also increasing demand on the second-hand market.
As a result, the average price of a used electric cars rose by over a third (34 per cent) in September 2020 compared to the same month last year, according to Motorway.co.uk.
Tesla has had the biggest price increase compared to September 2019, up 11 per cent, equating to an average of £4,746 more per vehicle.
In fact, the average price of a used Tesla increased by 3 per cent in September from the previous month.
Other manufacturers have also posted increases, says the car selling website.
Plug-in BMW’s have risen by 3 per cent, Hyundai’s up 10 per cent Nissan Leafs rising by 4 per cent and Renault’s Zoe up 6 per cent.
This would hit Nissan hardest, which produces the electric Leaf at its UK base in Sunderland.
The overall impact of tariffs would ‘further hamper the UK’s ambition to be a global leader in zero emission vehicle development, production and deployment, severely damaging industrial competitiveness’, the body said.
And with ministers setting a deadline of 2035 for new petrol and diesel cars to be banned from sale and the UK to become carbon neutral by 2050, restricted the appetite for electric vehicles today could have serious implications for these targets.
Mike Hawes, SMMT chief executive, said: ‘Just as the automotive industry is accelerating the introduction of the latest electrified vehicles, it faces the double whammy of a coronavirus second wave and the possibility of leaving the EU without a deal.
‘As these figures show, ‘no deal’ tariffs will put the brakes on the UK’s green recovery, hampering progress towards net zero and threatening the future of the UK industry.
‘To secure a truly sustainable future, we need our government to underpin industry’s investment in electric vehicle technology by pursuing an ambitious trade deal that is free from tariffs, recognises the importance of batteries in future vehicle production and ensures consumers have choice in accessing the latest zero emission models.
‘We urge all parties to re-engage in talks and reach agreement without delay.’
Investment bank UBS says electric and internal combustion engines cars will cost the same in 2024 as batteries become cheaper
‘EVs will cost the same to produce as petrol and diesel cars by 2024’, says new report
While the SMMT says the addition of WTO tariffs will see electric car prices accelerate more significantly than petrol and diesel vehicles on average, a new report claims this might only be the case for another three years.
Investment bank UBS says electric cars will cost the same to make as conventional motors as early as 2024 due to falling battery costs.
Based on analysis of batteries from the seven largest manufacturers, it says the extra cost to manufacture powerful lithium ion batteries versus their fossil fuel equivalents will shrink to just $1,900 (£1,470) per car by 2022.
Two years after that date, it calculates there will be complete parity with internal combustion vehicles – bringing to an end the last decade of EVs being at a significant premium.
Tim Bush, an analyst at the bank, told The Guardian that there will not be ‘many reasons left to buy an internal combustion engine car after 2025’ and car makers that try to hang on to sales of petrol and diesel powered cars ‘risk being left behind by rivals such as Tesla and Volkswagen’.