Fears about a tariff cliff-edge in UK-EU trade in electric vehicles (EVs) have been eased by a proposal by the bloc to delay the introduction of post-Brexit tariffs by three years.
The European Commission is set to announce the proposal officially today (6 December), according to reporting by the FT.
Duty-bound
It follows calls by members of industry in both the UK and EU to change the UK-EU Trade and Cooperation Agreement (TCA), signed following the UK’s departure from the bloc, to remove origin rules that would impose a 10% duty on cars with batteries manufactured outside the UK and EU.
Former chief Brexit negotiator for the EU Michel Barnier said in August that a modification was unlikely before a 2025 formal review of the agreement, though it now appears the British government’s desire for a deferral of the tariff may be met before its introduction.
Battery capacity
Politico notes the argument from several manufacturers that, though they aim to use UK or EU-developed batteries in production, it has taken longer than expected at the time of the TCA’s drafting for the continent’s battery manufacture capacity to increase to the required level.
With most batteries for UK and EU EVs coming from China, where 70% of the world’s lithium-ion batteries are produced, the incoming duty is likely to affect most trade in EVs between Britain and the bloc.
Politico’s Morning Trade newsletter adds that an initial one-year delay was considered by the EU due to concerns by some member states that a three-year delay would mean reopening the TCA, and stoke future disagreements with the UK.
France’s support for the three-year option, over which it has expressed scepticism, is based on a financial support package for EU battery manufacturing.
The IOE&IT perspective
The extension will come as a relief to many in the industry, including Mike Hawes, CEO of the UK trade association the Society of Motor Manufacturers and Traders (SMMT), who has previously called for a three-year delay.
Fergus McReynolds, director of EU public affairs for the Institute of Export and International Trade (IOE&IT), had this to say on the announcement:
“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.”
Charger challenge
The UK’s EV market was assessed at the recent EV Show in London, where a host of speakers outlined the need for improved infrastructure and clarification on regulation.
As a comparatively new industry, said exhibitor Suren Raymond of ChargeNet UK, it lacks “a lot of clear-cut information” on the law surrounding various aspects of EV-related manufacturing and exporting.
Another exhibitor present, Adam Jaber of Altran Magnetics, suggested that the UK’s exit from the EU had made doing business there in the EV industry more difficult, stating that “it’s less appealing than it used to be exclusively because of Brexit”.