EU could perform huge U-turn on electric vehicles in post-Brexit trade rule delay

This is dependent on whether 45 per cent of their value comes from the region, under the “rules of origin” regulations.

Some experts, including the European Automobile Manufacturers Association (ACEA), have suggested that it would be “practically impossible” for manufacturers to comply with the rules.

WATCH NOW: Mike Parry on electric vehicles

The majority of car manufacturers rely on Chinese companies for key components used in electric cars including battery parts

Maroš Šefčovič, vice-president of the European Commission, said Brussels would interpret “made in Europe” loosely next year.

He said he would be “very happy” if a deal was struck between the EU and UK before the end of the year, adding that he wanted the situation to be solved soon.

The Slovak diplomat told the Financial Times that the European Commission wanted to redefine what was considered under the “rules of origin”.

Earlier this month, the UK’s Business and Trade Secretary Kemi Badenoch said the EU’s refusal to delay post-Brexit tariffs is driven by “ideological reasons”.

She said the EU’s position was “very harmful and dangerous”, adding that it was ignoring German car manufacturers who had been calling for tariffs to be ditched.

There are fears that factories may reduce production by up to 480,000 vehicles between January 2024 and December 2026 unless the rules of origin regulations are scrapped.

Some EV manufacturers could be hit with an additional £3.7billion bill during this period unless restrictions are dropped.

A UK Government official said: “This doesn’t have to be complicated. European car manufacturers, the UK government, and many EU state governments are all asking for a delay to the deadline. The Commission should listen.”

This comes as the European Commission announced an investigation on subsidised electric cars coming from China.

The investigation will look into whether China benefits from illegal subsidies which could harm the production and success of European electric vehicle manufacturers.

Ursula von der Leyen, president of the European Commission, said the investigation would follow rules from the EU and the World Trade Organisation (WTO).

She added: “The electric vehicle sector holds huge potential for Europe's future competitiveness and green industrial leadership. EU car manufacturers and related sectors are already investing and innovating to fully develop this potential.

“Wherever we find evidence that their efforts are being impeded by market distortions and unfair competition, we will act decisively.

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“And we will do this in full respect of our EU and international obligations - because Europe plays by the rules, within its borders and globally. This anti-subsidy investigation will be thorough, fair, and fact-based.”