France to back last-minute delay to Brexit tariffs on electric vehicles

France to back last-minute delay to Brexit tariffs on electric vehicles

POLITICO — 2023-11-22

Automotive Industry

France is set to back a delay to new Brexit tariffs on electric vehicle sales between Britain and EU — paving the way for a last-minute breakthrough in Brussels.

The country has been the main opposition to extending a key grace period, which is due to expire on January 1, 2024 and add over £3,000 to the price of an average electric car traded across the Channel, according to industry forecasts.

A French diplomat with knowledge of the country’s position told POLITICO: “The intention is to back an extension.” They were granted anonymity to discuss ongoing deliberations.

France wants to arrive at a common position with other EU countries, who are all either supportive of a full extension, are not opposed, or have no position, according to multiple people familiar with discussions in Brussels.

But questions remain over whether France would back a full three-year delay to the tariffs requested by the UK government, the German government, and the British and European car industries — or push for a shorter one.

It comes after Olivier Becht, the French trade minister, told the Financial Times in an interview that he hoped a solution could be found “in the coming weeks” and that Paris was “open to ideas.”

But he said the country would be “attentive to the solutions that can be presented by the [European] Commission to solve this issue while bearing in mind that it is highly important to keep incentivizing [battery] investments on our soil.”

What the EV tariff talks are about

Virtually all electric vehicles made in the UK and EU crossing the Channel are set to be hit by the 10% tariffs in around a month’s time without a new agreement, because of manufacturers’ heavy reliance on Chinese-made batteries.

The use of the batteries, which manufacturers say cannot be sourced in the EU or UK due to a lack of domestic manufacturing capacity, will render the cars ineligible for tariff-free trade under the terms of the post-Brexit Trade and Cooperation Agreement.

These “rules of origin,” which are common in free-trade agreements, require a certain proportion of the value of a given car to be produced in either the UK or EU to qualify for the trade treaty’s benefits.

The automotive industry both in the UK and on the Continent say they plan to switch to UK and EU produced batteries as soon as possible, but that the supply chain has taken longer to develop than planned. They say a three-year delay to the new rules will give time to develop domestic battery production.

The French government and EU Internal Market Commissioner Thierry Breton have argued that the tariffs will encourage the development of the European EV battery industry, as producers scramble to ramp up domestic capacity to replace Chinese imports.

But supporters of an extension say the UK and EU misjudged how long it would take for British and European gigafactories to come online when the TCA was negotiated, and that more time is needed. They also point out that the rule would see electric cars slapped with tariffs while petrol and diesel cars are not — undermining governments' climate goals.

A report published this week by British lawmakers on the Commons business and trade committee into EV battery production warned there would be “serious unintended consequences” for both parties without an extension, and endorsed a three-year delay.