EU relaxes trade rules for electric cars from Great Britain
The news
The European Union plans to postpone strict rules on local content that would have led to expensive tariffs on cars traded between the bloc and Britain from January 1.
“This removes the threat of tariffs on electric vehicle exports from the EU to Britain and vice versa,” said Maros Sefcovic, executive vice-president of the European Union. told journalists in Brussels Wednesday.
Why it matters: Relief for automakers hit with tariffs.
The proposal provides a three-year reprieve in the trade government, and represents a huge reprieve for many carmakers, especially those with factories in Britain. Eighty percent of cars made in Britain are exported, with 60 percent going to the European Union. The postponement means that British electric vehicles with batteries made outside Europe will no longer face tariffs of up to 10 percent from three weeks.
European carmakers are said to have suffered similar blows when selling cars to Britain, a key market. The delay is likely to be seen as a victory for the British government of Prime Minister Rishi Sunak, which lobbied for the change along with the European car industry.
Background: Europe and Britain don’t make enough batteries.
The rule would have made it virtually impossible to import British-made cars with batteries from Asia into the European Union tariff-free.
Neither Britain nor Europe produces enough batteries for the increasing number of electric vehicles expected to be produced in the coming years. Batteries are the most expensive parts of electric vehicles.
Local origin rules are intended to discourage automakers from importing expensive parts and encourage local production. But the rule would have been counterproductive, the auto industry argued, because it would force consumers to pay more for many electric vehicles. Those higher prices could have opened the door to electric vehicles from outside Europe, especially China, where makers are marketing low-cost models that have gained popularity in Britain.
What happens next: Time for the battery industry to catch up.
The proposal still needs the support of European Union governments. The first indications are that the car industry will welcome this measure. An extension would “give the European battery industry time to catch up,” the Society of Motor Manufacturers and Traders, a British trade group, said in a statement on Wednesday.
Mr Sefcovic also said the European Union plans to provide 3 billion euros ($3.25 billion) to boost local battery production.