UK and EU agree three-year delay to EV tariff introduction

Fri 22 Dec 2023
Posted by: Benjamin Roche
Trade News

The UK and EU have today (22 December) agreed to cancel the introduction in 2024 of tariffs on electric vehicles (EVs) traded between the country and the bloc, the government says.

When the levy breaks

A previous deadline under the Trade and Cooperation Agreement (TCA) agreed between the UK and EU would have introduced new rules of origin requirements on 1 January 2024, with staggered increases in the requirements through to 1 January 2027.

The 1 January 2024 changes would have seen 10% levies imposed on EV imports to the EU where less than 45% of the EV parts by overall value, or less than 60% of the components of the battery, had been sourced in the UK or EU. “In recognition of the disruption to the global supply chain caused by the Covid-19 pandemic and Russia’s illegal invasion of Ukraine,” the government added today, “the UK and EU have agreed to cancel the 2024 changes.”

It also details that this means the current rules of origin will last for a further three years, up until the end of 2026.

‘No stone unturned’

Prime minister Rishi Sunak said that "We have been listening to concerns of the sector throughout this process, and I know this breakthrough will come as a huge relief to the industry.”

"We are also leaving no stone unturned to bolster our domestic battery industry and deliver long term certainty for our thriving automotive sector to help them grow their roots in the UK." The UK-based Society of Motor Manufacturers and Traders (SMMT) has been vocal in calling for a delay to the introduction of the tariffs. The head of the SMMT, Mike Hawes, said: "Deferring the rules of origin is a win for motorists, the economy and the environment.

"The measure will help cut carbon, support growth and jobs, and is the right decision for the decarbonisation of road transport."

‘Very welcome news’

European Commission vice president for interinstitutional relations Maroš Šefčovič said of the tariffs in October:

“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].”

It was said then that the EU preferred a one-year delay but that the UK was seeking the three-year one that has now been achieved. There was a glimmer of hope for the three-year option earlier this month, however, when the FT reported that the European Commission was considering the option.

One EU diplomat speaking to the FT said it was “another sign that EU-UK relations have matured to a point where long-term mutual benefits prevail over short-sighted political pandering”.

Speaking then, IOE&IT director of EU public affairs Fergus McReynolds said:

“This is very welcome news for the automotive sector in the UK and the EU.

“The delay will give the sector the breathing space it needs to develop the next generation of electric vehicles while avoiding tariffs on just the sort of vehicles consumers are being encouraged to purchase.”