Germany leads push to delay electric vehicle tariffs between EU and UK

Receive free EU trade updates

We’ll send you a myFT Daily Digest email rounding up the latest EU trade news every morning.

Germany is leading a European push to accept a British request for a delay to tariffs on electric vehicle sales between the UK and the EU, as industry warned the duties would cost billions of euros and reduce the workforce.

Member state diplomats discussed the UK request for a three-year postponement, which are set to come into force in January, for the first time on Monday. Berlin received some support from other countries, said three people briefed about the meeting, but France and the European Commission, which must oversee the enactment of any tweak to the law, are holding out, officials said.

According to the post-Brexit Trade and Cooperation Agreement (TCA) tariffs of 10 per cent will be imposed on EVs shipped across the Channel if they have batteries made outside Europe or the UK. But carmakers based in the EU and UK say they are not ready to implement the ruling.

The UK has asked to discuss the matter at Wednesday’s meeting in London of the Trade Specialised Committee, which brings officials from both sides together to discuss the TCA. Any change could be made quickly using the Partnership Council, a bilateral body which oversees the TCA.

The UK is the biggest market for EU carmakers. In 2022, 1.1mn passenger cars headed to the UK, nearly 20 per cent of the bloc’s total exports. 

The move comes as the EU launched an anti-subsidy investigation into China’s electric car industry which could see retaliatory measures placed on the bloc’s carmakers. Chinese EV makers are rapidly gaining market share in the UK and EU.

ACEA, which represents EU carmakers including BMW, Volkswagen and Renault, said on Monday this could cost the bloc’s automakers €4.3bn over the next three years, potentially reducing electric vehicle production by some 480,000 units, the equivalent annual output of two midsized factories. It would also hit UK-based manufacturers that export to the EU.

More restrictive “rules of origin” from January would mean that only vehicles made with European or UK battery parts would qualify for tariff-free trade. Acea said it was “impossible to achieve” the requirement because Europe still relied on Asia for inputs and assembly.

“Driving up consumer prices of European electric vehicles, when we need to fight for market share, is not the right move — neither from a business nor an environmental perspective,” said Luca de Meo, ACEA president and chief executive of France’s Renault. “We will effectively be handing a chunk of the market to global manufacturers.”

However, Paris opposes the move. “In our view, there is no question of reopening the TCA, which was the subject of delicate balances following complex negotiations, the result of which was signed and ratified by the UK,” said a French official. 

Thierry Breton, European commissioner for the internal market, also opposes a change, arguing that it would hold back battery investment.

However, there are divisions within the commission too, as powerful trade commissioner Valdis Dombrovskis is backing the German proposal.

Micky Adriaansens, Dutch economy minister, told the Financial Times that the Netherlands was reluctant to reopen the TCA but would “listen to the arguments of the Germans”, adding: “It’s very important with these issues that we are co-ordinated.” 

Diplomats said countries were weighing the warnings of the car industry against the need to build a European battery industry to reduce dependence on China.

The commission said: “These rules of origin aim to support the EU’s strategic objective to develop a strong and resilient battery value chain in the EU.”

Additional reporting by Jim Pickard in London