EU Council delays tariffs for EVs traded with UK

EU Council delays tariffs for EVs traded with UK

Automotive News Europe — 2023-12-21

News from Brussels

The European Union Council has approved a plan to give electric vehicle makers in the EU and Britain until the end of 2026 to comply with local content rules.

The decision by the EU's top decision-making body delays the imposition of tariffs on EVs traded between the EU and the UK that were due to come into effect on 1 January as part of post-Brexit arrangements.

Britain and the EU are each other's largest market for exports of EVs, which are being encouraged as an alternative to carbon-emitting internal combustion engine vehicles powered by gasoline or diesel.

The timeline extension was proposed earlier this month by the EU. This proposal was then put forward to the EU Council which gave its formal approval on Thursday.

The EU had planned to impose a 10% duty on EVs moving between the UK and the EU if less than 45% of their value comes from the region. The policy aims to encourage development of Europe's battery supply chain.

Chinese competition

Automakers pushed to delay the measure because local battery cell supply is not ready. They said tariffs would principally have helped outside competitors, such as Chinese automakers whose exports to Europe are surging.

Batteries represent 30 to 40% of a car's value and most are sourced from China, so Europe's carmakers argued they would have struggled to meet the local content requirements.

Europe's auto industry is expected to be able to adapt to the higher local content requirements by 2027 by expanding battery production for electric vehicles in this period, the Council said in a statement on Thursday 21 December . Financial support of €3 bn will be provided for this purpose, it added.

Relief in UK

The British government said the extension would save manufacturers and consumers up to 4.3 bn pounds ($5.45 bn) in additional costs.

"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," British Prime Minister Rishi Sunak said in a statement.

A trade association for the UK auto industry lauded the extension of the trade rules.

"Deferring the rules of origin is a win for motorists, the economy and the environment," said Mike Hawes, the head of the Society of Motor Manufacturers and Traders (SMMT). "The measure will help cut carbon, support growth and jobs, and is the right decision for the decarbonizsation of road transport."

Stellantis, which owns the UK Vauxhall brand, warned in May that British car plants faced closures if the rules were to be imposed in 2024 as planned. Many others in the industry had voiced similar concerns.