Eleventh hour delay over EU electric vehicle tariff

Vehicle manufacturers across Europe have welcomed the European Commission’s 11th-hour proposal to delay tariffs on electric vehicle sales between the EU and UK from 2024.

Due to take effect from 1 January, the stricter ‘Rules of Origin’ would have placed higher minimum restrictions on all battery parts and some battery raw materials to ensure they are locally sourced within the EU or UK, in order to continue to benefit from tariff-free trade between these markets.

Part of the post-Brexit Trade and Co-operation Agreement (TCA), the rules were meant to circumvent cheap imports coming in, but instead would have left electric vehicles that didn’t meet the new thresholds subject to a 10% tariff when traded across the Channel.

This would add billions of pounds in costs, pushing up prices for buyers and rendering both UK and EU manufacturers uncompetitive in each other’s markets, while making imports from other markets more attractive.

EU vehicle makers had also warned the tougher rules would potentially reduce BEV production by around 480,000 units over the next three years, equivalent to the output of two average-sized auto factories.

The European Commission announced that it had proposed a specific one-off extension – until 31 December 2026 – to the council. However, the EU stressed that it was a one-off move – and said the proposal did not affect the TCA’s wider rules of origin, which will be applicable as of 2027, as planned, amid concerns that the UK might bargain for other changes.

It is also proposing a clause rendering it legally impossible for the EU-UK Partnership Council to extend this period further, thereby effectively locking in Rules of Origin in force as of 2027.

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