In brief
SMMT cautioned that European Commission proposals and stringent rules of origin could hurt UK vehicle exports, especially electric models, and called the upcoming EU‑UK summit crucial for safeguarding an 80‑billion‑euro trade link. Forecasts predict a dip in 2026 followed by a 752,000‑unit rise in 2027, however the industry faces tariff risks and pressure from ambitious domestic EV targets.
On Thursday, the Society of Motor Manufacturers and Traders (SMMT) warned that European Union trade measures could derail the British automotive industry’s projected recovery next year, after a review of EU “Made in EU” proposals and rules of origin set to take effect in 2027.
According to the SMMT’s independent outlook, British vehicle production is expected to fall in 2026 before climbing to 752,000 units in 2027 as new electric‑vehicle models enter the market. The association characterised the proposed EU measures as two of three major threats to UK competitiveness: first, the “Made in EU” scheme could, in its current form, effectively exclude cars manufactured in Britain from the EU market; second, stricter rules of origin could trigger annual tariffs of about 1.4 billion pounds on two‑way EV trade under the existing Trade Cooperation Agreement.
Earnings from vehicle exports already surpass three‑quarters of the UK’s total production, with the EU accounting for roughly 57.5 percent of those exports. The SMMT argued that the combination of restricted market access and tariff escalation would inflict damage on the automotive industry on both sides of the Channel.
The SMMT said both measures would damage the automotive industry on both sides and called the forthcoming EU‑UK Summit “a vital opportunity to agree pragmatic solutions and safeguard an 80‑billion‑euro (about 90 billion dollars) trading relationship.”
“A vital opportunity to agree pragmatic solutions and safeguard an 80‑billion‑euro trading relationship.”
The society also warned that what it described as unrealistic domestic electric‑vehicle sales targets were putting manufacturers under acute pressure, eroding profitability, diverting resources and undermining the attractiveness of the UK as a place to invest.
Potential Impact of EU Measures
Industry experts note that the EU’s “Made in EU” proposals aim to establish a common quality label for goods that meet EU-origin criteria. In their current draft, that label would exclude vehicles engineered, assembled or substantially modified in Britain, effectively blocking them from the EU market unless they secure a different trade status. Such a move could force UK manufacturers to shift supply chains or source components from EU partners, adding operational complexity.
Under the Trade Cooperation Agreement, new rules of origin coming into force in 2027 would require that a higher percentage of a vehicle’s value be produced within the EU before it can be marketed there without tariffs. The SMMT estimates that, for electric‑vehicle trade, these rules would translate into an annual tariff bill of around 1.4 billion pounds, or roughly 1.9 billion U.S. dollars. That figure represents a significant increase over the relatively low tariffs that currently apply.
Both sets of proposals would affect not only finished‑vehicle exports but also the supply chain for batteries, motors and electronic components that UK firms source from EU partners. Disruptions could cascade through the entire manufacturing ecosystem, pushing costs higher and potentially deterring new UK investment in automotive plants.
In contrast, the SMMT’s 2027 production forecast hinges on a surge of new models, most of them electric. If the proposed tariffs and exclusions are imposed, the industry’s ability to deliver those models to EU customers—and therefore to meet the 752,000‑unit target—could be compromised.
The UK government’s stance on the negotiated trade relationship remains cautious, while EU officials have yet to publish a definitive timeline for the “Made in EU” rules’ implementation. The upcoming EU‑UK Summit is expected to be the platform where these ambiguities will be addressed.
The SMMT’s remarks come amid a broader debate over the UK’s automotive future. With electric vehicles projected to represent a growing share of the market, the industry is already under pressure to accelerate electrification, secure battery supply chains, and maintain competitiveness against global rivals. The proposed EU measures could amplify those challenges, especially if tariffs push UK cars beyond price‑sensitive EU consumers.
While the association has not yet quantified a precise loss in terms of units or revenue, it stressed that the threat of exclusion from the EU market and the additional tariff bill could erode the industry’s profitability and solidify the EU’s preference for domestic production.
Questions persist over the extent to which the SMMT’s concerns will resonate with EU negotiators, how the UK will balance domestic EV targets with export realities, and whether the EU‑UK Summit will yield a pragmatic framework that preserves the vital 80‑billion‑euro trade relationship for all stakeholders. As both sides prepare to negotiate, the automotive community remains attentive to policy developments that could reshape the industry’s cost structures and export prospects for years to come.
