France signals willingness to loosen new rules on EV sales with UK

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France has signalled that it wants to delay the introduction of tariffs on electric vehicle sales between the UK and EU, removing a big obstacle to a new deal over the levy due to come into effect in January.

Olivier Becht, French trade minister, told the Financial Times in an interview that his country wanted to resolve the issue. France had been the only big voice of opposition within the bloc to the UK’s request to postpone the 10 per cent duty on EV sales.

“I hope that we can find a solution in the coming weeks,” Becht said, adding that Paris was “open to ideas” relating to postponing the tariffs before December 31.

“The UK is the number one market for European production with a growing demand for EVs and many opportunities for our companies,” he added. “So of course we will be attentive to the solutions that can be presented by the [European] Commission to solve this issue while bearing in mind that it is highly important to keep incentivising [battery] investments on our soil.”

The post-Brexit Trade and Cooperation Agreement (TCA) states that tariffs of 10 per cent will be imposed on EVs shipped across the Channel if they have batteries substantially made outside Europe or the UK.

The UK and EU car industries have said Europe does not yet have enough domestic battery-making capacity to meet the so-called rules of origin threshold and warned the tariffs would cost it billions and stifle demand.

A UK request to delay the levy for three years was supported by Germany and other member states, which believe Chinese companies that already pay the tariffs would be the main beneficiaries from higher prices for EU-made electric cars. 

France was the country in the bloc with a big car industry that opposed a blanket extension at a meeting of EU members in Brussels last week, according to a senior EU diplomat with knowledge of the discussion.

Paris said that changing the terms of the TCA risked creating a precedent that could be exploited by London to argue for other changes to the deal that has hurt EU-UK trade ties since it was introduced in January 2021.

Paris asked the commission to look at addressing EU carmakers’ concerns without reopening the TCA. It argued that large parts of the EU industry should be able to meet the terms of the deal within a few months. Becht said he also believed this was possible.

The commission is considering amendments to the trade rules but is wary about removing incentives for investment by the car industry into EU battery supply chains, officials said.

The European Automobile Manufacturers’ Association said that “patchwork solutions” to the tariff dispute were not good enough. 

“We are veering towards a knife-edge deadline,” director-general Sigrid de Vries said. “A three-year extension — not less — to current rules of origin is indispensable to protecting the competitiveness of Europe’s electric vehicle manufacturing.” 

Maroš Šefčovič, commission vice-president, said last week he “will look for solutions that will be supported by all member states”.