The European carmakers got a boost when Brussels proposed to delay by three years the tariffs which were to be applied to electric vehicle sales in the UK and EU starting January 1.
Officials confirmed that the European Commission will support the deferral of the introduction of the 10 percent levy for cars with batteries manufactured outside the UK or EU.
The British government, supported by carmakers across Europe, spent months advocating for the deferral post-Brexit tariff that it claimed would impose excessive costs on the industry.
The tariffs, which were designed to encourage the development of a European battery supply chain would not be as effective as intended. This is because the domestic industry remains small, warned the carmakers.
The commission said it will stick to the original timeline, as a delay may discourage battery manufacturers from investing in Europe.
Maros SEFCIOVIC, Brexit Commissioner, has recently backed down, due to fears that raising prices on EU cars for the UK, which is the biggest export market of the EU, will simply allow Chinese brands to take their place. Around one-third of the electric vehicles sold in Britain are made by Chinese manufacturers.
Officials expect that 27 states, including Germany and approximately 20 other governments, will now reach a consensus.
France recently indicated its willingness to listen to its industry, which has opened the door for the Commission to make a decision.
Paris worried that London might exploit the precedent set by tariff changes within the post-Brexit Trade and Cooperation Agreement between the EU and UK to advocate for additional modifications.
After warning, they would lose €4.3bn and face a reduction in production of nearly 500,000 electric cars between 2024-2027, European automakers ultimately prevailed.
A complex set of rules on origin meant that the value of parts made in the UK and EU would have increased to 45 percent by January 1, 2018. Batteries account for between 30 and 40 per cent of the value of a vehicle, so it was impossible to use power units outside the region.
The European Automobile Manufacturers Association disagreed, saying that there is insufficient battery production capacity in Europe to meet the EU’s demands. Many packs have to be imported from Asia.
The industry representative stated that the delay would allow the European battery industry to have more time to expand their capacities and meet the new regulations.
A UK official said that Kemi Badenoch, the UK’s Department of Business and Trade, had raised the issue repeatedly with EU member countries.
A diplomat from the EU said that the EU and UK relations have matured. They believe that both parties now prioritize long-term benefits instead of short-sighted political pandering.
The UK may find it difficult to accept the conditions attached to the delay.
According to a spokesperson for the commission, commissioners will discuss EU-UK origin rules on batteries and electric vehicles on Wednesday. The outcome of the discussion will be presented by the executive vice-president Sefcovic after the meeting, he said.