Electric vehicle manufacturers face a £3.7bn bill over the next three years unless the EU drops the introduction of tariffs on trade between the bloc and Britain, industry bosses have said.

Factories may reduce production by up to 480,000 vehicles during that time unless the so-called “rules of origin” rules are abandoned, according to the European Automobile Manufacturers’ Association (ACEA).

The rules, which are due to come into force in January, were designed to force car companies to build vehicles using parts sourced from within the UK or the EU - or face a 10pc tariff.

However, manufacturers rely on components from markets like China and ACEA has warned that complying with the EU rules will be “practically impossible”.

ACEA president and Renault Group chief executive Luca de Meo said: “Driving up consumer prices of European electric vehicles, at the very time when we need to fight for market share in the face of fierce international competition, is not the right move – neither from a business nor an environmental perspective.

“We will effectively be handing a chunk of the market to global manufacturers.

“Europe should be supporting its industry in the net-zero transition as other regions do – not hindering it.”

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