In a move to support the growth of the electric vehicle (EV) industry, the European Union (EU) and the United Kingdom (UK) have agreed to postpone tariffs on EVs for a period of three years. This decision comes as part of a bilateral trade deal and aims to provide carmakers with additional time to meet local content requirements and strengthen the European battery supply chain.
Originally, tariffs were set to be imposed from the beginning of next year, with a 10% duty being charged on EVs and batteries traded between the EU and the UK if less than 45% of their value originated from the region. However, industry experts and policymakers argued for a delay, citing the lack of an adequate cell supply to meet the requirements.
EU chief for post-Brexit relations, Maros Sefcovic, expressed his satisfaction with the deal, referring to it as a "balanced solution that protects the EU's interests." UK Prime Minister Rishi Sunak also welcomed the decision, stating that it would provide a "huge relief to the industry."
The agreed-upon three-year grace period aims to allow the EV industry sufficient time to expand battery production within the region. This move is expected to further develop the European battery supply chain. Trade associations on both sides have commended the decision, as it provides much-needed certainty to Europe's growing EV battery supply chain.
To support the expansion of battery production, both the EU and the UK have pledged funds. The EU's executive arm plans to allocate €3 billion ($3.3 billion) under the Innovation Fund, while the UK has earmarked over £2 billion ($2.5 billion) in Chancellor of the Exchequer Jeremy Hunt's Autumn Statement to support EV manufacturing, battery production, and the supply chain.
It is important to note that this tariff delay is a one-off extension, and it cannot be prolonged beyond the agreed three-year period. The decision has come into immediate effect, providing reassurance to the EV industry and its stakeholders.
Overall, the postponement of tariffs on EV trade is a significant step toward fostering the growth of the industry and promoting sustainable transportation across Europe. With the extension, car manufacturers have been granted additional time to adjust to the local content requirements, ensuring the robustness of the European battery supply chain in the long run.