In brief
SMMT in London warned that EU ‘Made in EU’ proposals and stricter rules of origin could slash UK vehicle exports and cost manufacturers up to 1.4 billion pounds in tariffs. The body forecasts a dip in 2026 but a 752,000‑unit production surge in 2027 driven by electric vehicles. It calls the upcoming EU‑UK summit crucial for negotiating safeguards for a vital 80‑billion‑euro trade partnership.
LONDON, Oct. 29 – The Society of Motor Manufacturers and Traders (SMMT) warned that European Union trade measures could imperil the projected recovery of British vehicle production next year.
According to an independent industry outlook released by the SMMT, annual vehicle output is expected to fall in 2026 before climbing to 752,000 units in 2027 as new models, largely electric vehicles, enter production.
The society identified three major threats that could undermine the automotive sector’s competitiveness. First, the European Commission’s ‘Made in EU’ proposals, in their current form, could effectively exclude UK‑built cars from the EU, the world’s largest export market for British vehicles.
Second, the stricter rules of origin that will take effect in 2027 under the Trade Cooperation Agreement could impose tariffs totaling 1.4 billion pounds (about 1.9 billion U.S. dollars) each year on two‑way electric‑vehicle trade.
Exports comprise more than three‑quarters of British vehicle production, with the EU receiving 57.5 percent of those exports as of September, the SMMT data show. Both the removal from EU sale halls and the new tariff costs, the society warned, would damage the automotive industry on both sides of the Channel.
In its statement the SMMT 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.”
In addition to the trade‑rule threats, the society flagged the sector’s domestic electric‑vehicle sales targets as unrealistic, arguing that the pressure erodes profitability, diverts resources, and undermines the UK’s attractiveness as an investment destination for automakers.
Industry Outlook and Impact
The SMMT’s industry outlook projects a temporary decline in production for 2026, followed by a sharp rebound in 2027 largely due to the introduction of new electric‑vehicle models. However, the expected disruptions from EU trade measures could blunt that recovery, creating uncertainty for manufacturers already navigating costly shifts in supply chains and market access.
The body’s analysis underscores the interconnected nature of the automotive value chain: a tariff increase of 1.4 billion pounds annually is calculated based on current two‑way electric‑vehicle trade volumes, implying substantial cost increases for both exporters and importers.
By alerting policymakers to these risks, the SMMT aims to prompt early negotiation and strategy development ahead of the EU‑UK Summit, a meeting that will determine the operational details of the trade relationship between the UK and the EU in the post‑Brexit era.
Should the ‘Made in EU’ proposals be implemented without adequate safeguards, UK‑manufactured vehicles may lose access to the EU market, an outcome the society warns would not only hurt the UK’s automotive production numbers but also strain supply chains that are already stretched by global semiconductor shortages and the transition to electric vehicles.
Conversely, if the UK secures favourable adjustments in the upcoming negotiations, the automotive industry could maintain its export momentum while capitalising on the growing European demand for electric vehicles.
As the UK’s automotive sector navigates these complex trade dynamics, the SMMT’s warning serves as a call to action for industry leaders, regulators and policymakers to address the impending challenges before they crystallise into tangible losses on the road.
