EU Postpones Electric Vehicle Tariffs, UK Car Industry Sighs Relief

In a significant turn of events, the European Union has softened its stance on post-Brexit electric vehicle (EV) tariffs, averting an abrupt price hike for UK-produced EVs and those manufactured in the EU.

Deferred Tariffs Benefit UK Car Industry

The impending 'rule of origin' tariffs, which were set to introduce a 10% charge on EVs starting from January, have been deferred for three years. This move follows persistent persuasion by the UK's Business Secretary Kemi Badenoch, lobbying the EU to push back the deadline.

Had the tariffs been enacted, it would have resulted in an average increase of £3,400 to the price tag of electric cars, posing a severe blow to consumers and the automotive industry alike. The industry braced for over £4 billion in losses, but this tariff delay has now provided a reprieve.

Shifting Dynamics In EU-UK Trade Relations

After initial rigid positions from figures such as Michel Barnier, the EU's former Brexit negotiator, who stressed no leeway on the issue, there has been a change in tone. The tariffs would have meant that for a car to avoid these charges, a higher percentage of its components would need to be sourced from within the UK or EU borders.

This rule posed a particular challenge for the EV market, where batteries—a major cost component—often come from Asia due to the current lack of sufficient production capacity within Europe. The deferral now allows more time for UK and EU car makers to establish local battery supply chains capable of meeting demand.

Positive Reactions and Long-term Benefits

Car manufacturers and industry bodies, including the SMMT, have welcomed the delay, having advocated for a three-year grace period while Europe's battery manufacturing capabilities catch up. While the UK awaits the opening of new 'gigafactories' by Nissan and its partners in Sunderland and Tata's plant in Somerset, this delay will help cushion both markets and consumers from immediate price shocks.

The European Commission, subject to agreement by the member states, is expected to formalize this postponement, seen by many as a sign of EU-UK relations maturing towards recognizing long-term mutual benefits over short-term political gains.

This development coincides with the UK government's efforts to mandate a shift towards electric vehicles, with a target for 80% of car sales to be electric by 2030—an ambition that faced political friction domestically but was ultimately passed with support beyond the ruling party.

EU, Brexit, EV