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Europe’s carmakers received a big boost after Brussels proposed a three-year delay to tariffs that were due to hit electric vehicle sales between the UK and EU from January 1.
Officials said the European Commission would on Wednesday support the delay to the introduction of a 10 per cent levy on cars with batteries made outside the UK and EU.
The British government, backed by carmakers from across Europe, had spent months arguing for the deferral of the post-Brexit tariff, which it said would heap excessive costs on to the industry.
Designed to spur the development of the European battery supply chain, the tariffs would not work as intended, carmakers warned, as the homegrown industry remains subscale.
The commission had previously insisted it would stick by the original timetable, saying a delay would reduce incentives for battery makers to invest in the bloc.
But in recent days Brexit commissioner Maroš Šefčovič relented, amid fears that increasing prices for EU cars in the UK, the bloc’s biggest export market, would simply allow Chinese brands to take their place. Around a third of electric vehicles sold in the UK are Chinese-made.
A qualified majority of the 27 member states must now agree, but with Germany and around 20 other governments in favour officials believe that is a foregone conclusion.
Last month France, which had long ignored requests from its industry to agree a delay, signalled it was willing to listen, opening the way for the commission decision.
Paris had worried that changing the tariffs – part of the broader post-Brexit Trade and Cooperation Agreement (TCA) between the EU and the UK – risked creating a precedent that could be exploited by London to argue for other changes to the deal.
Ultimately European carmakers prevailed after warning that they stood to lose €4.3bn while facing cuts in production of almost 500,000 electric vehicles between 2024-27.
Under complicated rules of origin, the value of parts required to be made in the UK or EU to avoid tariffs would have risen to 45 per cent on January 1. Since batteries account for 30-40 per cent of a car’s value, it effectively ruled out using power units from outside the region.
But the European Automobile Manufacturers Association argued there was not yet enough battery-making capacity in the EU to fulfil the requirements, with many packs having to be imported from Asia.
An industry representative said the delay “would give the European battery industry time to increase their capacity so they can meet the new rules”.
An official from the UK’s Department of Business and Trade said that business secretary Kemi Badenoch had repeatedly raised the issue with EU member states.
An EU diplomat said: “This is yet another sign that EU-UK relations have matured to a point where long-term mutual benefits prevail over short-sighted political pandering.”
However, the proposed delay is expected to come with conditions that may be difficult for the UK to swallow.
A commission spokesperson said commissioners would discuss EU-UK rules of origin on electric vehicles and batteries on Wednesday. “Executive vice-president Šefčovič will present the outcome of that discussion after the meeting,” he added.
