EU working to postpone electric vehicle tariff giving car manufacturers possible reprieve

Mon 9 Oct 2023
Posted by: Danielle Keen
Trade News

car factory

The EU is working on plans to postpone the implementation of tariffs on electric vehicles (EVs), the FT reported on Friday (6 October).

European Commission (EC) vice-president, Maroš Šefčovič, said current plans to introduce a 10% tariff on EVs under the EU-UK Trade and Cooperation Agreement (TCA) will be “interpreted loosely” when introduced next year.

The EC’s former Brexit negotiators also said he would consider a one-year delay to the rules. The UK government is said to prefer a three-year delay, with business and trade secretary Kemi Badenoch telling the Spectator “let’s just remove the tariffs” and calling the EC’s decision not to delay the tariffs “ideological”.

Rule of origin requirements coming into force on 1 January 2024 mandate that 45% of the EVs parts by overall value, and 60% of the electric battery, must be sourced in the UK or EU.

Currently manufacturers must ensure that 40% of EV parts by value are sourced in Europe or the UK, with battery requirements yet to apply.

Solution

Šefčovič said that he was hoped a compromise could be reached before a 31 December deadline, with the ultimate goal being to redefine what counts as European under the rule of origin requirements.

Although the plan is to facilitate trade of EV’s across the channel, he did warn that relaxing the rules could only go so far:

“What is important is how you actually do the counting of the rules of origin.

“We are in the process of developing this methodology and building up the battery industry in Europe and in the UK, so I think we have to recognise as originating in Europe any part of that battery [that is European].”

Pushback

Multiple industry players, including the Society of Motor Manufacturers and Traders (SMMT), have criticised the tight deadline to switch suppliers, referred to the January deadline a “cliff-edge”.

Concerns were raised that tariffs would suppress demand for EVs, also hindering environmental goals, with SMMT CEO, Mike Hawes saying in July:

“We need to make sure those [tariffs] aren’t applied or else there is the real potential that the EVs are more expensive and face a tariff, whereas petrol diesel don’t.”

There have been continued calls for the requirements to be pushed back until 2027 from SMMT, car manufacturers and Westminster.

10 of the 27 EU countries, including auto-manufacturing giant Germany, have also backed calls for a longer extension.