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The European Union is drawing up a plan to postpone tariffs on electric vehicle sales between the UK and the bloc for a year in an attempt to defuse a row over the new rules, which are due to come into effect in January.
Maroš Šefčovič, European Commission vice-president, told the Financial Times that Brussels would interpret “made in Europe” rules very loosely in 2024, giving carmakers more time to switch battery sourcing from Asia to Europe.
“We want to solve it and we are also discussing this with UK partners,” Šefčovič said, adding that he would be “very happy” if a deal could be struck before the December 31 deadline.
The post-Brexit Trade and Cooperation Agreement (TCA) dictates 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.
London has asked for a simple three-year postponement to the changes.
Šefčovič said the commission wanted to redefine what counts as European under the so-called rules of origin. “We do not have a precise timeline, but we are now working on our internal position discussions and we know that this is the pressing issue for the EU and the UK,” he added.
If finalised, the compromise will be welcomed by the industry on both sides of the Channel, who have warned the tariffs were likely to cost them billions and stifle electric vehicle demand.
Germany and about 10 of the 27 member states support the UK demand for a three-year delay to implementing the rules, while France remains opposed.
However, officials close to Thierry Breton, the French industry commissioner, said he considered the year-long postponement to be a workable solution as it did not reopen the Brexit deal or compromise EU ambitions to build European battery supply chains.
Under rules of origin, EVs traded across the Channel must have 60 per cent of their battery packs and 45 per cent of their parts by overall value sourced from the EU or UK or face 10 per cent tariffs. There are similar rules for the cathode chemicals and cells that comprise the battery pack and are mostly imported.
Šefčovič said: “What is important is how you actually do the counting of the rules of origin. We are in the process of developing this methodology and building up the battery industry in Europe and in the UK so I think we have to recognise as originating in Europe any part of that battery [that is European].”
He declined to offer further details, saying they were still being worked on.
But he was clear that the rules could only be postponed for one year because he wanted to encourage battery investment in the EU.
Sam Lowe, a trade expert at consultancy Flint Global, said: “One of the easiest ways to resolve this is to fiddle with the definitions. This could work if the thresholds are high enough to account for the high value of imported foreign chemicals. If not, it won’t.”
But he said it was unclear whether the UK would accept a one-year fix.
The UK government said: “We need a joint UK-EU solution to avoid consumers facing tariffs on electric vehicles from 2024 which do not apply to diesel cars.
“We have raised this with the European Commission and industry and are ready to work with them to find a solution within the existing structure of the Trade and Cooperation Agreement. The UK remains one of the best locations in the world for automotive manufacturing.”
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