Electric Vehicles: All the Buzz in Global Trade
The use of electric vehicles in global trade is a major focus area right now. But what challenges do traders of EVs face with customs and logistics? Find out in this article.
Wide-spread adoption of electric vehicles sparked by net-zero aims
Since the first Conference of the Parties (COP1), held in Germany in 1995, members of the United Nations have collectively been researching and responding to climate change.
Over the last decade, the urgency of the issue has been recognised across the community, and pledges have been made to cut emissions of greenhouse gas.
With more than 25% of the average person’s carbon footprint coming from their car, governments are incentivising people to buy electric vehicles by enabling them to be the more economical choice, whilst educating the population on the need to switch.
Furthermore, the European Union announced last year that there will be a ban on the sale of new internal combustion engine (ICE) vehicles from 2035. Manufacturers are also required to cut 55% of their emissions on all new models by 2030 (compared to their 2021 emission data).
As a result, the adoption of hybrid and electric vehicles has been accelerated by both people and businesses like ours.
Sales of EV vehicles are surging
In 2021, the European Union exported approximately €42 billion in hybrid and electric cars, almost an 800% increase compared to 2017. Imports for the same period grew by over 400%.
When you isolate fully electric vehicles, the value of those imported into the EU increased by over 2400% - the largest increase for a single vehicle type. Meanwhile, non-plug-in hybrid vehicles saw the most growth in exports with a 5000% increase.
Note that these statistics only apply to passenger cars classified on the following codes:
- Full electric: 87038010, 87038090
- Plug-in hybrid: 87036010, 87036090, 87037000
- Non-plug-in hybrid: 87034010, 87034090, 87035000
The United Kingdom has also seen substantial growth in electric vehicle sales, with approximately 311,500 battery and hybrid vehicles sold in 2021, compared to only an estimated 48,170 in 2017. This suggests a growth of nearly 550%.
When you compare the two types of vehicle on Statistica, sales of hybrids increased by over 270%, whilst battery electric vehicles increased by more than 1100%!
Sales of electric cars also surpassed diesel cars for the first time at the end of 2022 in the UK for the first time, a sure sign that the trend is continuing.
So, what are the customs challenges for electric car manufacturers?
As part of their pledges to reduce the carbon footprint of car manufacturing, the EU and UK agreed on a phased increase in the required composition percentage for claiming preferential origin on cars.
Currently, electric vehicles require 40% of their parts to originate within the EU or UK (depending on which way you are trading) for the importer to claim preferential origin. However, this is due to rise to 55% in January 2024, and 55% in January 2027.
If car manufacturers are unable to navigate supply chain issues surrounding domestic manufacture of components, then the new rules of preferential origin may increase costs on parts. These will ultimately be passed on to the consumer, which will be counterproductive to net-zero aims.
The EU and UK recently reopened discussions on this issue to look into solutions that will support the industry whilst proceeding with the necessary increases.
Wasting money on duty
Many manufacturers import parts from other countries, paying duty on every component during the import clearance. However, there are ways to suspend or eliminate these charges to improve your cash flow and margins.
Inward Processing Relief, bonded warehousing, sourcing parts from a preferential country, and other duty management functions can all help your business to reduce costs and enable you to be more competitive in the international market as a result.
Getting your goods classified correctly is essential to your optimising your supply chain customs. Without the correct HS code, you could be paying more duty than necessary, or missing out on the use of special procedures such as Inward Processing Relief.
You could also be missing the opportunity to claim a change in origin for a component if the conditions are different, which is essential for electric car manufacturers looking to sell abroad. For a component to receive a change in origin, conditions for a certain amount of processing must be met – and these vary between HS codes.
Want to supercharge your electric car customs operation?
Customs Support provides specialist expertise throughout Europe, with offices in 13 countries across Europe. Our customs consultants help manufacturers like you map commodity codes, obtain licences for specialist customs procedures, and leverage customs functions of all kinds to streamline your processes.