Fleets face a price hike in monthly rentals of up to £80 on a £40,000 electric vehicle (EV) on contract hire and £50 on a similar salary sacrifice electric car.

The figures were provided by the boss at an FN50 top 10 leasing company, who did not wish to be named, but is one of many in the industry concerned at the failure to delay new rules of origin due to be implemented in January.

The UK-EU Trade and Cooperation Agreement (TCA) temporarily exempted electric vehicles (EVs) from the rules that said products must be substantially made in Britain or the bloc to qualify for the EU’s zero tariff, zero quota regime, because EV batteries are predominantly imported from Asia.

The tariff exemptions were agreed as part of the Brexit deal and are due to end from January 1, 2024.

Unless a new deal can be struck, under the more restrictive rules the only way to avoid these duties will be to source all battery parts and some critical battery material in the EU/UK, which manufacturers say is practically impossible to achieve today.

The Society of Motor Manufacturers and Traders (SMMT) is urging the EU and UK to strike an immediate agreement to avoid damaging Brexit tariffs on electrified vehicles.

Analysis by the trade body says that electrified vehicles that do not meet the new thresholds will be subject to a 10% tariff when traded across the Channel.

This could mean an average price hike of £3,400 on EU-manufactured BEVs bought by British buyers, and a £3,600 rise on UK-made BEVs sold in Europe.

Conventional petrol and diesel vehicles would escape tariffs, which the SMMT says would have the perverse effect of incentivising the purchase of fossil fuel-powered vehicles.

Chair of the Association of Fleet Professionals (AFP), Paul Hollick, told Fleet News at 10: “All the OEMs in Europe and the UK are involved in lobbying the UK and the European Commission to try and get that dispensation to effectively be pushed back by another three years to the end of 2026.

“I don’t think anybody wants to see it happen. But we’re running out of time. That’s the worry.”

Appearing alongside Hollick, Danielle Davison, fleet director at Herd, said: “If you’re going to put 10% on to the cost of the purchase price, and there’s no shift from the manufacturer in the support terms that you're going to get, then in reality that’s going to result in higher rental and leasing prices.

“If residual values are deemed to become greater, which is arguably unlikely, then you have to find somewhere in the middle.

“I would argue that the manufacturers need to find ways to support that, because I’m not quite sure how customers are going to take that, there’s so little margin in it for the rental and leasing companies that I think it’s highly unlikely you’ll find them able to absorb it.”

EU-UK electrified vehicle trade has more than doubled recently, enabled by the EU-UK Trade and Cooperation Agreement (TCA).

It has grown 104% in the three years since the TCA was signed, up from £7.4 billion at the end of 2020 to £15.3bn last year, although much of this uplift has been in the past 12 months.

The situation has helped total UK automotive global trade in finished vehicles and components get back on track following the pandemic, and it is currently on course to be worth more than £100bn by the end of 2023, according to the SMMT report, Open Roads – Driving Britain’s global automotive trade, published last month.

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