This op-ed was first published on Borderlex on 26/02/2026.
The success of the European Union’s transition to electric vehicles depends on forging trade partnerships.
But this transition risks being stymied by restrictive rules of origin, as well as the EU’s intention to bolster its own manufacturing base at the expense of trade partners. A middle way is needed.
The global electric vehicle transition is gathering pace. In just four years, electric vehicles have surged from less than 5% of new car sales to one in five passenger vehicles sold worldwide.
By 2030, nearly half of all new vehicles could be electric.
From a climate perspective, this is a welcome development. But electric cars are no longer just a climate story; they are increasingly linked to industrial competitiveness, job creation and economic security.
In the EU, the electric car fleet is at the centre of the European Commission’s emerging Made in Europe strategy under the upcoming Industrial Accelerator Act.
The IAA aims to boost domestic electric vehicle and battery manufacturing, such as by tightening local content requirements to access subsidy schemes and compete in public procurement tenders.
At the same time, the EU is seeking mutually beneficial cooperation with trading partners to build resilient and diversified international electric vehicle supply chains – as exemplified by the first-ever Clean Trade and Investment Partnership signed with South Africa in November 2025.
But balancing a push for domestic electric vehicle production with international partnerships requires rethinking trade rules while carefully managing trade-offs.
Trade agreement rules of origin versus value creation: a changing equation
The electric vehicle transition is reconfiguring not just how cars are made but where value is created.
Unlike vehicles with internal combustion engines, whose value is spread across components, an electric vehicle ’s battery alone comprises 30-40% of the vehicle’s total value.
Electric vehicle production is geographically concentrated. A handful of countries dominate supply chains, with China accounting for 80% of global battery cell production and around 70% of electric vehicle manufacturing. It also dominates the processing of the critical raw materials required for their production.
These structural supply chain differences reveal a growing mismatch between today’s automotive trade rules and the new economics of electric mobility.
Existing rules of origin in trade agreements were designed for the internal combustion engine era.
South Africa’s transition to electric car production
Left unchanged, rules of origin risk becoming bottlenecks that restrict the electric vehicle trade and slow the uptake of clean technologies.
Automotive trade between the EU and South Africa offers a telling example. South Africa’s auto sector supports over 115,000 direct manufacturing jobs and more than 500,000 across the value chain, contributing 5.3% of GDP.
Three out of every four vehicles produced in South Africa are exported to the EU. Yet the majority of South Africa’s automotive exports are internal combustion engine vehicles. With electric vehicles gaining momentum and the EU’s plans to phase out sales of new internal combustion engine vehicles by 2035, manufacturers will need to adapt.
Under the Economic Partnership Agreement between the EU and the Southern African Development Community, vehicles qualify for zero tariffs only if 60% of their value is produced locally, regionally, or in the EU.
Without domestic battery production, electric vehicles manufactured in South Africa would rely on imported batteries – mostly from China – making it nearly impossible to meet the rules of origin threshold.
As a result, South African-assembled electric vehicles would face the EU’s 10% ‘most favoured nation’ tariff on cars, which could slow their uptake and jeopardise the future of the South African auto industry.
Redesigning rules of origin for the electric vehicle era requires a delicate balancing act between advancing the transition and supporting local manufacturing.
Overly strict rules can discourage electric vehicle trade among trade agreement partners, leaving electric vehicles at a disadvantage relative to internal combustion engine vehicles despite their environmental benefits.
Yet if too lenient or prolonged, rules of origin risk cementing dependence on imported batteries, indirectly strengthening China’s dominant position in the battery supply chain while reducing incentives to build domestic battery manufacturing.
To offer temporary relief to the industry without disrupting trade, the EU and South Africa recently agreed to a temporary derogation from existing rules of origin.
The measure aims to allow electric vehicles and plug-in hybrids produced in South Africa to access the EU tariff-free – even when using imported batteries – giving the industry time and incentives to invest in domestic battery manufacturing.
A cautionary tale from the EU-United Kingdom trade accord
While this approach strikes a balance between trade, climate, and industry concerns, tinkering with rules of origin alone will remain insufficient to boost battery production.
The difficulty is visible in EU-UK trade.
Rules of origin for electric vehicles and batteries were phased in under the 2020 Trade and Cooperation Agreement, gradually tightening local content requirements to allow domestic battery industries to scale up.
However, stricter thresholds due to apply in 2024 were postponed because domestic battery manufacturing remained undeveloped.
Tighter requirements are now scheduled for 2027. But it is unclear whether the industry will be ready.
Compliance will be particularly challenging as the TCA requires high-value battery inputs, such as cathode active materials, which make up 40-45% of a battery cell’s value, to be sourced locally, yet production is still largely concentrated in China.
Even if domestic cathode supply increases, it may struggle to compete with lower-cost Chinese alternatives, raising questions about whether firms will source locally at a higher cost to export at zero tariff, or import cathodes and pay the standard tariff, if cheaper.
Aligning trade, industrial policy and climate objectives
For South Africa, electric vehicle cooperation supports sustainable industrial growth, high-skill manufacturing jobs and decarbonisation efforts.
The parties’ complementary strengths, along with their already-integrated auto sectors, provide a strong basis for deeper cooperation on electric vehicles.
South Africa has an established automotive manufacturing base, with European automakers such as Mercedes-Benz and BMW already producing plug-in hybrids there.
The country also offers lower manufacturing costs and well-developed port infrastructure and is endowed with critical raw materials essential for batteries.
South Africa holds the world’s largest reserves of manganese and platinum-group metals and is strategically positioned to participate in global battery value chains through refining, beneficiation and battery manufacturing.
The EU can support South Africa’s electric vehicle transition by bringing in investment, technologies and much-needed financial support, while offering an important export market for South Africa’s electric vehicles.
Deeper cooperation is already taking place through new initiatives like the EU-South Africa CTIP, which identifies battery raw materials and electric vehicles as areas of mutual interest for trade and investment.
The EU is financially supporting the extraction and processing of magnet rare earths and battery-grade manganese in the country, which could be the basis for further cooperation across other segments of the supply chain.
Despite shared strategic interests, expanding cooperation towards higher-value activities may prove challenging, as both parties seek to build domestic battery industries and capture more value at home.
Navigating trade-offs and limits of electric vehicle cooperation
Efforts to facilitate electric vehicle trade and investment by rethinking rules of origin and experimenting with new cooperation models like CTIPs are welcome.
Yet these initiatives will now coexist with a more assertive EU industrial policy, which seeks to favour electric vehicles and batteries produced within the bloc, including in public procurement, and to qualify for subsidies.
Depending on their ultimate design, these measures may sit uneasily with trading partners’ own industrial objectives.
For South Africa, there is a risk that European automakers operating locally may opt to invest in battery production in the EU to access financial incentives, making it harder to attract investment in domestic battery production.
As a consequence, South Africa risks being locked into a role of raw material supplier while continuing to rely on imported batteries.
Such a development could also call into question the EU’s commitment to building mutually beneficial partnerships and help partners move up the value chain, a narrative long championed by the commission.
It would also stand in the way of a successful electric vehicle transition, which depends on the EU’s ability to balance domestic industrial ambitions with outward-looking trade and investment strategies.
Working around these trade-offs requires leveraging mutually beneficial areas of cooperation in the electric vehicle value chain, rethinking rules of origin for electric vehicles in EU trade agreements and managing competing priorities.
