The European Union is reportedly planning to suspend the 10% tariffs on imports and exports of electric vehicles (EVs) between the EU and the UK for three years, in a major boost for the car industry. The move comes after intense lobbying by EU and UK carmakers, who warned that the tariffs would harm the competitiveness of EV production in Europe and benefit Chinese manufacturers.
The tariffs on EVs are part of the Brexit trade deal that was agreed in December 2020, which allowed the UK to leave the EU’s single market and customs union. The deal also included rules of origin, which determine the origin of a product based on the value and location of its components. According to the rules of origin, from 1 January 2024, any EV exported from the EU to the UK or vice versa must be at least 45% made in either the EU or the UK or it will be subjected to a 10% tariff. This means that the batteries, which account for most of the cost of an EV, must be sourced from within Europe. However, most batteries are currently imported from China, South Korea and Japan, which dominate the global battery market. Therefore, carmakers are racing to build battery factories and supply chains in Europe to avoid the tariffs.
The impact of the tariffs on the car industry
The car industry, which employs about 14 million people in Europe, has been struggling with the impact of the Covid-19 pandemic, the transition to low-emission vehicles and the global chip shortage. The introduction of the tariffs on EVs would add another challenge to the sector, as it would increase the cost and complexity of trade between the EU and the UK, which are each other’s largest markets for cars. The tariffs would also reduce the demand for EVs in both markets, as they would make them more expensive for consumers. This would hamper the efforts to achieve the climate goals of both the EU and the UK, which have set ambitious targets for reducing greenhouse gas emissions and increasing the share of EVs in their fleets.
The car industry has been urging the EU and the UK to suspend the tariffs on EVs for three years, until the end of 2026, to allow time for the new battery factories and supply chains to become operational. The industry argues that this would protect the competitiveness of EV production in Europe and prevent the loss of market share to Chinese manufacturers, which are hoping to expand their presence in Europe. The industry also claims that the suspension of the tariffs would not require reopening the Brexit trade deal, but could be done through a technical adjustment.
The EU’s plan to suspend the tariffs
According to the Guardian, the EU is set to announce its plan to suspend the tariffs on EVs for three years, in response to the pressure from the car industry. The plan, which has been discussed by the EU’s working party on the UK, would involve a temporary waiver of the rules of origin for EVs, as well as a series of “cushioning measures” to mitigate the impact of the tariffs. The plan would need the approval of the 27 member states and the UK, as well as the European parliament and the UK parliament. The plan is expected to be presented to the UK in the coming days, as part of the ongoing talks to resolve the post-Brexit issues.
The EU’s plan to suspend the tariffs on EVs is seen as a major boost for the car industry, as it would provide certainty and stability for the sector, as well as a level playing field for the EU and the UK. The plan would also benefit the consumers, as it would lower the price and increase the availability of EVs in both markets. The plan would also support the green transition of the car industry, as it would encourage the investment and innovation in battery production and supply chains in Europe.
