Electric vehicles will be exempt from Brexit tariffs

Electric vehicles will be exempt from Brexit tariffs in EU-UK trade for another three years. This is the proposal of the European Commission. EU member states have not yet reached an agreement.

The European Commission wants to delay Brexit tariffs on electric vehicles and batteries for three years. That is why today he has proposed to member states to exempt them from customs rules in trade with Great Britain during that period. EU member states must now approve the proposal by a qualified majority. This requires the approval of at least 15 of the 27 EU member states. These states must also represent at least 65% of the EU population.

Due to the UK's withdrawal from the EU, the new customs rules would come into force on 1 January 2024. Vehicles with less than 45% of their value added in the EU or the UK would be subject to a tax of 10%. This would affect manufacturers that do not meet the value-added quota for electric vehicles, for example due to a lack of battery production capacity. Under the Commission's proposal, the regulation, which could lead to customs charges, would not apply until 2027.

Great Britain left the European Union at the end of January 2020. The reason for the tariffs are the so-called rules of origin of the Trade and Cooperation Agreement (CCA), which forms the basis of cooperation with the EU from 2021.

Since the free trade agreement was concluded, experts suspected that these rules of origin could become a problem for Great Britain as an economic zone. There are no large battery factories on the island. Only Nissan has a small factory in Sunderland and is investing in a second one there. Hopes for the creation of more factories have not been realized. Britishvolt, which had ambitious plans for a plant in the north of England, ran out of cash in January. Auto companies prefer to invest within the EU or in the more favorable Asian markets.

Cost problems due to customs duties

Without a delay, EU manufacturers would have struggled to supply batteries and other urgently needed parts for electric vehicles to the UK. Initially, Brussels counted on a significant increase in battery production in the European Union itself. But the coronavirus crisis and the war in Ukraine prevented that, according to Brussels.

British carmakers, for their part, feared that because of the tariffs they would no longer be competitive from next year in the important EU export market. German carmakers would also be hit by tariffs on exports to the UK in the future if they are not further suspended. The German Association of the Automotive Industry (VDA) has already described the tariffs as a significant disadvantage for European companies compared to their Asian competitors in the important British market.

Relief in the automotive industry

The president of the association Hildegard Müller reacted positively to the European Commission's announcement on Wednesday: "This decision is the right one and a victory for the climate, industry and consumers." EU states and the UK must now implement the proposal as soon as possible.

Both British car manufacturers and the German car industry will benefit from the expansion of rules of origin, pointed out Marc Lehnfeld of the federal company Germany Trade and Invest (GTAI). Foreign trade in vehicles, parts and engines represents around 22% of German-UK trade this year. This is the most important group of goods.

"The British car industry can now regain confidence," said Lehnfeld. "The German auto industry could also benefit from the change." Germany is the UK's largest supplier of fully electric and hybrid vehicles./DW