EU, UK move to delay electric car tariff as automakers seek supply chain relief
European and UK automakers are set to get temporary relief from stricter post-Brexit trade rules as Brussels considers delaying a 10% tariff on many electric vehicles from January 1. The proposed pause reflects slower-than-expected growth in regional battery production and rising concern that local manufacturers could lose further ground to Chinese rivals.
Highlights
- European Commission is considering a proposal to delay the 10% tariff on most electric vehicles under EU-UK rules of origin from January 1.
- Acea estimates 82% of 520,000 electric vehicles and vans sold in 2027, worth 17.9 billion euros, would face tariffs under current rules.
- Commission's options include a possible one-year delay and a two-year offset mechanism, both shorter than automakers' requested timeframe.
Proposed tariff delay under review
As first reported by Financial Times, the European Commission is consulting industry on proposals to postpone the 10% levy that would otherwise apply to most electric vehicles under EU-UK rules of origin from January 1. The UK supports the move, according to several people familiar with the matter cited in the report.The trade provisions, introduced under the Brexit deal that took effect in 2021, are designed to build a European battery supply chain by steadily increasing the level of domestic content needed for tariff-free trade. But battery chemicals and production capacity have not expanded as quickly as policymakers expected, leaving many models still reliant on battery packs and materials from Asia.
Acea, which represents EU carmakers, says about 82% of the 520,000 electric passenger vehicles and vans expected to be sold in 2027, worth roughly 17.9 billion euros, would face tariffs under the current framework. The group is calling for a battery pack assembly requirement to be delayed until 2030 and a separate requirement for European-made cathode material used in electrodes until 2032.
The Commission's options, which could still change, are understood to involve a shorter delay than the industry wants in order to preserve demand for EU-made batteries. They include a one-year postponement and a two-year mechanism allowing manufacturers to offset exported cars with non-compliant batteries against domestically sold models that use compliant batteries.
We have previously detailed the Bank of England’s view that the UK has weathered the energy price shock better than expected.
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