According to an industry group, new Brexit trade regulations governing electric vehicles could cost European manufacturers $3.75 billion over the next three years.
The regulations are intended to ensure that the majority of locally sourced components are used in the production of electric vehicles in the EU. However, manufacturers on both sides of the Channel claim they are unprepared.
The European Automobile Manufacturers Association (ACEA) also warned that the measures could result in a 480,000-vehicle decrease in EU factory output and they stated that customers would bear the cost.
The primary issue is the implementation of so-called "rules of origin" in January. Under the terms of the Brexit deal, the UK-EU Trade and Cooperation Agreement, they extend to shipments of automobiles across the English Channel.
They will ensure that batteries for electric vehicles are manufactured in either the United Kingdom or the European Union.
Those automobiles that do not satisfy the requirements will incur 10% tariffs - or taxes - when crossing the English Channel in either direction.
The regulations were intended to protect European industry from inexpensive imports. However, because battery production in Europe has not increased as quickly as anticipated, automakers are struggling to satisfy the new requirements.
It is a significant issue for European manufacturers. The United Kingdom is their main export market, with 1,2 million vehicles entering British ports in 2013.
Similarly, the United Kingdom exports more automobiles to the European Union than any other region. Tariffs could make the production of electric vehicles more expensive, leading to possible price increases.
The ACEA desires a three-year delay in the implementation of the new regulations and has urged the European Commission to intervene.
Raising the consumer price of European electric vehicles at a moment when we need to fight for market share in the face of fierce international competition is not the correct move, said Luca de Meo, CEO of Renault and president of ACEA.
He continued, "we will effectively abdicate a portion of the market to foreign manufacturers."
For the rules to be moved back, the EU and the United Kingdom would need to reach an agreement.
Kemi Badenoch, the Business Secretary of the United Kingdom, expressed optimism last week that such an agreement could be reached.
According to him, it would be improper to reopen the Brexit agreement to pacify the auto industry.
According to the European Commission, Brexit has altered the trade relationship between the United Kingdom and the European Union.
In addition, the norms of origin are intended to foster the development of a "robust and resilient battery value chain in the EU."
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders in the United Kingdom, told reporters last week that he believed an agreement would be reached, but that it could be a last-minute affair.
He stated that they remain hopeful that an agreement can be reached as it makes perfect logic.
This week, EU and British trade representatives will convene in London. It is currently unknown if the new regulations will be on the agenda.
