EU member states seek solution for EV tariffs between EU and UK

In the struggle for a compromise solution between the EU and the UK on the so-called rules of origin for electric cars, three solution options are now being discussed among the EU states. An agreement must be reached by the end of the year, first within the EU and then with the UK.

There is finally some movement in the decision-making process on electric car tariffs between the European Union and Great Britain: According to information from Bloomberg, the EU Commission has now informally presented three options to the member states. This is because any solution that requires an amendment to the EU-UK Trade and Cooperation Agreement (TCA) would also depend on the approval of the member states.

Background: In the course of Brexit, the UK and the EU agreed that from 2024, only those electric vehicles whose components originate 45% by value from the EU or the UK can be sold duty-free across the English Channel; for the battery, this quota is as high as 60%. If this is not the case, customs duties of ten per cent will be levied. This policy is intended to promote the development of a European battery supply chain.

The British government subsequently asked for the implementation of the rules to be postponed for three years. However, the EU rejected this request in the summer.

Bloomberg now reports, citing internal sources, that three options are currently informally on the table in the EU: postponing the entry into force of the rules of origin for electric cars by the aforementioned three years to 2027, a “buffer” of one year or maintaining the current plan for the rules to come into force on January 1, 2024. With these options, the Commission is trying to “strike a balance between protecting the car industry and creating incentives for more battery production in the EU”, according to Bloomberg.

As reported by the Financial Times in September, the majority of EU countries are now said to favor an uncomplicated postponement of three years. This includes Germany and the UK. However, some are also said to be open to the one-year transitional arrangement, which is considered complicated, according to Bloomberg. France was previously the only major member state to oppose a complete postponement, but is said to be signaling that it is willing to accept the one-year “buffer”.

Car manufacturers on both sides of the Channel would most likely welcome a postponement to 2027. Bloomberg reports that the industry fears that the tariffs could cost the sector €4.3 billion over the next three years.

According to Bloomberg’s sources, talks between the EU Commission and the member states are to be stepped up in the coming days. After all, time is pressing.

bnnbloomberg.ca