Germany leads a European push for accepting a British request to defer tariffs between the UK an EU on the sale of electric vehicles, after industry warned that the duties could cost billions and lead to a reduction in the workforce.
On Monday, diplomats from member states discussed for the first-time the UK’s request for a postponement of three years, which is set to enter into force in the month of January. Three people who were briefed on the meeting said that Berlin had received some support. However, France and the European Commission are refusing to approve any changes.
The post-Brexit Trade and Cooperation Agreement will impose a 10 percent tariff on EVs that are shipped across the Channel if their batteries were made outside of Europe or the UK. However, carmakers in the EU and UK claim they are not yet ready to implement this ruling.
The UK asked that the issue be discussed at the meeting of the Trade Specialised Committee on Wednesday in London, where officials from both countries meet to discuss TCA. The Partnership Council oversees the TCA and can make any changes quickly.
The UK is by far the largest market for EU automakers. In 2022, nearly 20 percent or 1.1 million passenger cars will be exported to the UK.
This move coincides with the EU’s launch of an investigation into the Chinese electric car industry. The EU could impose retaliatory actions on the carmakers in the EU. Chinese electric car makersare rapidly gaining market shares in the UK, and EU.
ACEA which represents EU automakers such as BMW, Volkswagen, and Renault said on Monday that this could cost the bloc’s automakers €4.3bn in the next three year, resulting in a reduction of electric vehicle production to 480,000 units. This is the equivalent output per annum of two medium-sized factories. This would also affect UK manufacturers who export to the EU.
In January, the “rules on origin” will be more restrictive. Only vehicles with European or UK batteries can qualify for tariff-free trading. Acea claimed that it was “impossible” to meet the requirement, as Europe relied heavily on Asia for inputs.
Luca de Meo is the president of ACEA and CEO of France’s Renault. He said that driving up the prices of European electric cars, while we are fighting for market share, was not a good move. “We’ll be giving a piece of the market away to global manufacturers.”
Paris, however, opposes this move. A French official said, “Our view is that there’s no point in reopening TCA. It was the subject to delicate balances after complex negotiations. The result was signed and approved by the UK.”
Thierry BRETON, European Commissioner for the Internal Market, is also against a change. He argues that it will hold back investment in batteries.
There are also divisions in the commission, with powerful trade commissioner Valdis Dobrovskis supporting the German proposal.
Micky Adriaansens said that the Netherlands would listen to German arguments but was reluctant to reopen TCA. He added: “We are very important in these matters that we coordinate.”
Diplomats say that countries are weighing up the warnings from the auto industry with the need to develop a European battery sector to reduce their dependence on China.
The Commission stated: “These rules are intended to support the EU strategic objective of developing a robust and resilient value chain for batteries in the EU.”