EU Signals Delay to Electric Vehicle Tariff in UK Trade Reprieve

The European Union is considering postponing a 10% tariff on most electric vehicles traded with Britain that is scheduled to take effect on January 1, according to a report. Brussels is consulting the motor industry on proposals to delay the levy, which would apply to most vehicles from that date, and the UK supports the move, two people familiar with the matter said. Members of Acea, the lobby group for EU carmakers, worry the tariff is pricing them out of the UK market while Chinese producers increase their market share. Acea said about 82% of the 520,000 electric passenger vehicles and vans expected to be sold in 2027, worth about €17.9 billion, would have to pay the tariff. The Brexit deal, in effect since 2021, gradually raises the domestic content a car needs to be exempt from tariffs. European battery and chemical production has not grown as fast as expected, and many models still use battery packs and chemicals from Asia. Acea wants a tougher battery pack assembly rule delayed until 2030 and a European-made cathode material requirement until 2032, the report said. The two sides already pushed back the rules from 2024 to 2027, using a legal act stating they would not repeat the move. The European Commission's proposals, which could still change, involve a shorter delay than Acea wants, to maintain demand for EU-made batteries, the report added. They include a simple one-year delay, or a two-year plan letting manufacturers offset cars exported with non-compliant batteries against models sold domestically with compliant batteries. The EU chemicals industry has lobbied hard against a delay, arguing it would damage demand for its products. Companies have invested millions of euros in European production of cathode active materials. Two UK officials said they expected serious negotiations on a delay to begin after an EU-UK summit on November 20. A report this month for the SMMT, which represents UK carmakers, found the industry still imports around two-thirds of the lithium-ion batteries it uses despite an estimated investment of €72 billion in battery and electric vehicle manufacturing facilities since 2017. 'The UK and EU are bound by €80bn in annual automotive trade and millions of jobs,' SMMT Chief Executive Mike Hawes said. The EU accounts for 60% of UK vehicle exports, while 30% of EU exports go to the UK, the biggest buyer of EU-built electric vehicles, the LSE Consulting report said.

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Key Points

The EU is considering delaying a 10% tariff on most electric vehicles traded with Britain, set to begin January 1, to support carmakers facing Chinese competition. The UK backs the move. The automotive sector and battery supply chain are directly impacted.
Acea warns that about 82% of the 520,000 electric passenger vehicles and vans expected to be sold in 2027, worth €17.9 billion, would be subject to the tariff. The chemicals industry opposes a delay, arguing it would hurt demand for European-made cathode materials.
The Brexit deal's domestic content rules are phased in, but European battery and chemical production has lagged, leaving many models reliant on Asian components. The EU chemicals sector and battery manufacturers are affected by the timing of the rules.

The European Union is moving to postpone a 10% tariff on most electric vehicles traded with Britain that is due to start on January 1, according to a report, offering a reprieve for carmakers facing Chinese competition.

Brussels is consulting the motor industry on proposals to delay the levy, which would apply to most vehicles from January 1, the report said, citing people familiar with the matter. Two of them said the UK supports the move.

Members of Acea, the lobby group for EU carmakers, worry the tariff is pricing them out of the UK market while Chinese producers increase their market share. Acea said about 82% of the 520,000 electric passenger vehicles and vans expected to be sold in 2027, worth about €17.9 billion, would have to pay the tariff.

The Brexit deal, in effect since 2021, gradually raises the domestic content a car needs to be exempt from tariffs. European battery and chemical production has not grown as fast as expected, and many models still use battery packs and chemicals from Asia.

Acea wants a tougher battery pack assembly rule delayed until 2030 and a European-made cathode material requirement until 2032, the report said. The two sides already pushed back the rules from 2024 to 2027, using a legal act stating they would not repeat the move.

The European Commission's proposals, which could still change, involve a shorter delay than Acea wants, to maintain demand for EU-made batteries, the report added. They include a simple one-year delay, or a two-year plan letting manufacturers offset cars exported with non-compliant batteries against models sold domestically with compliant batteries.

The EU chemicals industry has lobbied hard against a delay, arguing it would damage demand for its products. Companies have invested millions of euros in European production of cathode active materials.

Two UK officials said they expected serious negotiations on a delay to begin after an EU-UK summit on November 20.

A report this month for the SMMT, which represents UK carmakers, found the industry still imports around two-thirds of the lithium-ion batteries it uses despite an estimated investment of €72 billion in battery and electric vehicle manufacturing facilities since 2017.

“The UK and EU are bound by €80bn in annual automotive trade and millions of jobs,” SMMT Chief Executive Mike Hawes said.

The EU accounts for 60% of UK vehicle exports, while 30% of EU exports go to the UK, the biggest buyer of EU-built electric vehicles, the LSE Consulting report said.

Risks

The European Commission's proposals could still change, and the delay may be shorter than Acea wants, creating uncertainty for automakers and battery producers. The automotive and chemicals sectors face planning challenges.
The EU chemicals industry argues a delay would damage demand for its products, despite millions of euros invested in European cathode active material production. This poses a risk to the chemicals sector and the EU's battery supply chain goals.
UK officials expect serious negotiations to begin after the November 20 EU-UK summit, leaving limited time before the January 1 deadline. The automotive and trade sectors face potential disruption if no agreement is reached.

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EU Signals Delay to Electric Vehicle Tariff in UK Trade Reprieve

Key Points

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