9:26 am, July 6, 2023
EVs being exported from the EU to the UK will still have tariffs on them from next year as a result of Brexit, despite a plea to defer the trade rule.
The government and European carmakers had wanted the planned rule delayed as they fear it’ll add huge costs to the industry between 2024 and 2027.
However, Richard Szostak, a senior official at the European Commission, has told them the rule is needed to encourage domestic production, according to the Financial Times.
To avoid 10 per cent tariffs, rules of origin stipulate that any EVs that are sold across the Channel must have three-fifths of their battery and 45 per cent of their parts by overall value hailing from either the UK or EU.
However, Szostak is reported to have told parliamentarians in the UK and EU that battery production had ‘fallen off a cliff’.
He said that as a result of huge subsidies offered by the USA via its Inflation Reduction Act, the EU’s share of worldwide investment in battery production plummeted from 41 per cent in 2021 to two per cent last year.
Szostak was quoted as saying: ‘In addition to the pull factor [from the act]…we would be adding a push factor encouraging batteries to be bought in China or the US [by not having cross-Channel tariffs].
‘That is the other side of the discussion. The EU when judging its interest has to look at both sides of this question.’
Because it’s taking so long for battery factories to be opened in the UK and on the continent, coupled with China’s dominance of important parts of the process, most Europe-made cars won’t satisfy the new rules of origin, said the FT.
According to EU car lobby group Acea, the levy means its members will face a €4.3bn (circa £3.7bn) bill between 2024 and 2026.
What’s more, the EV quota that the British government is bringing in next year will affect continental European carmakers, such as Mercedes, VW and Ford, that sell large quantities of vehicles here.
Twenty-two per cent of their UK sales will have to comprise zero-emission vehicles in 2024, and to meet that target, EVs that are built on the continent will have to be imported.
Because post-Brexit trade deals mean most South Korean and Japanese EVs are able to be imported tariff-free, EU carmakers will lose market share here if their EVs have the 10 per cent levies imposed on them.
Vehicles made in China already pay the levies, but because their starting price is a lot lower they’re able to compete with EVs made in the EU.
The FT quoted UK trade minister Lord Dominic Johnson as telling the parliamentarians that both sides shouldn’t ‘try to beggar each other’ by having supply chains that are separate.
He is seeking ‘proper cross-border access to each others’ supply chains which makes them more efficient’.
Johnson added: ‘It’s a clear realisation among us all…that there is nothing to be gained by having unnecessary friction that reduces trade and welfare and wealth.’
A UK government spokesperson was quoted by the FT as saying: ‘The business and trade secretary has raised concerns about the 2024 rules of origin changes for electric vehicles and their batteries with the EU and is determined to find a joint UK-EU solution that ensures the UK remains one of the best locations in the world for automotive manufacturing.’
