The European Union has bowed to demands from European carmakers and the British government for a delay to the introduction of 10% export tariffs on electric vehicles (EVs).
The so-called rules of origin apply to vehicles made in the bloc and sent to the UK – and vice-versa – making EVs made in the EU more expensive in Britain, and potentially hitting exports.
The tariffs were agreed as part of the Trade and Cooperation Agreement (TCA) that was struck as part of Brexit.
In order to avoid tariffs, at least 55% of the value of EVs would have to be from the European Union or Britain, with a higher percentage for battery cells and modules and even more for battery packs.
The European Commission has now proposed delaying the new tariffs by three years.
Tariffs are already charged – on electric vehicles that contain less than 40% of their value and 30% of their batteries from the EU or UK.
The proposal is to continue those tariffs until 2027.
Brexit commissioner Maros Sefcovic was initially concerned that a delay in bringing in the new tariffs would have knocked investment in batteries in the EU.
But he was reported, by the Financial Times on Tuesday, to have changed his mind and proposed a three-year extension.
The decision was formally adopted by the European Commission on Wednesday and is now expected to be implemented following consultations with member states.
The Commission also said it was setting aside an additional €3bn to boost the EU’s battery manufacturing industry.
Maros Sefcovic feared that an extension to the tariff’s implementation would send the wrong signal on investment
Europe’s car industry, many EU national governments and the UK have long argued that the tariff would have added the equivalent to hundreds or thousands of pounds to the price of new electric cars sold Europe-wide, making them less attractive to buyers at a time when households are already struggling to afford basics.
In addition to the inflationary pressures, the move was also seen as further harming demand for the vehicles at a time when they remain more expensive than the traditionally-powered cars they are set to slowly replace, helping reduce reliance on climate warming fossil fuels.
Carmakers on both sides of the Channel are currently struggling to source their own batteries, with most imported from China, despite a growing number of battery gigafactory projects getting the green light.
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Nissan and Jaguar Land Rover‘s owner are among manufacturers to have secured government support for factories in the UK.
The additional €3bn announced by Brussels is also an incentive for investment.
Both the EU and UK have a 2035 deadline for a ban on the sale of new vehicles powered by petrol or diesel.
The government in Westminster had initially sought a 2030 timeframe but full implementation was overturned by prime minister Rishi Sunak on cost grounds, to the fury of car