European Commission set to delay 10% tariff on EV sales between the EU and UK

  • EU likely to delay 10% tariff on UK-EU EV sales for three years.
  • Carmakers, including BMW and Stellantis, advocated for the delay to prevent job losses.
  • Proposal includes a €3 billion fund to speed up domestic EV production.

The three year delay on the 10% EV sales tariff will come as a relief to the UK’s the automotive industry

The European Commission is set to propose a three-year postponement of a 10% tariff on electric vehicle (EV) sales between the EU and the UK. Without the delay, the tariff will begin on January 1, 2024. This delay comes in response to fervent lobbying by major players like BMW, Volkswagen, and Stellantis.

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The potential tariffs had prompted warnings from Stellantis. The automotive supergroup suggested the risk of shutting down operations in Britain. That would lead to the loss of thousands of jobs. Now, all eyes are on the full cabinet of European commissioners for the final say.

Simultaneously, the European Commission is advocating for a €3 billion fund to bolster the battery industry. This will massively accelerate the production of domestically manufactured EVs. However, France initially opposed the tariff suspension. Representatives argued against revisiting the Brexit trade deal and offering protection to an EV sector perceived as slow to develop.

The proposed delay does not entail revisiting the Brexit deal but necessitates approval from the European Council and the Brexit partnership council. A key emphasis is that the tariff suspension is a one-off measure.

The three years are contingent on the industry’s successful scaling up by 2027.

European carmakers had cautioned that failing to lift the tariff would result in additional costs of up to €4.3 billion. The industry would either absorb those costs, or pass them onto consumers. The 10% tariff was for EVs with batteries made outside the UK and EU under the post-Brexit trade deal.

This delay aims to address concerns about the competitiveness of EU carmakers and potential Chinese dominance in crucial markets. Ursula von der Leyen, the European Commission leader, will discuss trade imbalances with Chinese President Xi Jinping. The main talking point will be the growing deficit of approximately €400 billion.

The delay, if greenlit, will carry conditions related to EU-UK rules of origin on electric vehicles and batteries. This will ensure a strategic and measured approach to this pivotal decision.

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