The European Commission is reportedly preparing to recommend a three-year delay on imposing tariffs on electric vehicles (EVs) traded between the UK and the European Union. These tariffs were set to come into effect from January 1st, 2021 if less than 45% of an EV's value comes from the region. The intention was to encourage the development of Europe's battery supply chain. However, car manufacturers, the UK, and most EU member states have been pushing for a delay as the local cell supply is not yet ready. France, in particular, has been resistant to a straightforward extension but has indicated its openness to finding a flexible solution.
The recommendation for the delay would first need to be approved by EU member states and then followed by a joint decision with the UK government. If EU commissioners sign off on the proposal, member states will discuss it in the coming days. Previously, the EU had been exploring a 12-month cushion as an option; however, the three-year delay is now being considered.
The EU's aim in delaying the tariffs is to provide more time for local battery production in the region to pick up next year. This assumes that car manufacturers will be able to adjust their supply chains to meet the stricter requirements for EVs exported to the UK. However, it is not guaranteed that EVs entering production in 2024 and 2025 will be exempt from tariffs, and not all manufacturers may be able to adjust their supply chains in time to meet the content requirements.
Carmakers, including Volkswagen and Renault, have raised concerns about the potential impact of the tariffs, highlighting that it could cost the sector €4.3 billion ($4.7 billion) over the next three years and would benefit Chinese brands. The industry has been lobbying for a postponement, emphasizing the negative consequences the tariffs would have on both consumers and the automotive industry during an important transition period.
The UK's auto trade lobby has warned that the tariffs would increase the cost of British-built electric vehicles by approximately £3,600 ($4,500) when sold in Europe, and around £3,400 when EU-made EVs are sold in the UK. They argue that postponing the rules for three years would support consumer choice and affordability.
The European Commission aims to strike a balance between safeguarding the automotive industry and encouraging increased battery production within the EU. By proposing a delay, they aim to prevent price hikes for EVs at a crucial moment in the transition to electric mobility. With discussions among member states on the horizon, the fate of the proposed delay will soon be determined.