Electric cars should be exempt from Brexit tariffs in trade between the EU and Great Britain for another three years – the Brussels Commission is proposing. The EU states still have to agree.
The EU Commission wants to postpone Brexit tariffs for electric cars and batteries for three years. That is why today it proposed to member countries that they should be exempt from customs rules when trading with Great Britain for this period. The EU states must now approve the proposal with a qualified majority. This requires the consent of at least 15 of the 27 EU states. These must simultaneously represent at least 65 percent of the EU population.
Due to Britain’s exit from the EU, new customs rules were actually supposed to come into force on January 1, 2024. Vehicles whose value creation was less than 45 percent in the EU or Great Britain would then have been subject to a tariff of 10 percent. This would affect manufacturers who do not achieve the value added ratio for electric cars due to a lack of battery production capacity. According to the Commission’s proposal, the regulation, which can lead to tariffs, should only apply from 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 in the Trade and Cooperation Agreement (TCA), which has formed the basis for cooperation with the EU since 2021.
Cost disadvantage due to tariffs
Without a delay, EU manufacturers would have had problems sourcing batteries and other urgently needed parts for electric cars from Great Britain. Brussels originally relied on significantly increased battery production in the European Union itself. But the Corona crisis and the Ukraine war prevented this, it was said in Brussels.
British car manufacturers, on the other hand, feared that they would no longer be competitive in the important EU export market from next year because of the tariffs. German car manufacturers would also be affected by tariffs when exporting to Great Britain in the future if they are not continued to be suspended. The Association of the Automotive Industry (VDA) has already described the taxes as a significant disadvantage for European companies compared to their Asian competitors in the important market in the United Kingdom.
Relief in the auto industry
Association President Hildegard Müller responded positively to the EU Commission’s announcement on Wednesday: “This decision is the right one and a win for the climate, industry and consumers.” The proposal must now be implemented as quickly as possible by the EU states and the United Kingdom.
Both British car manufacturers and the German auto industry benefited from the extension of the rules of origin, emphasized Marc Lehnfeld from the federally owned company Germany Trade and Invest (GTAI). In German-British trade, foreign trade in cars, parts and engines accounts for around 22 percent this year. This is the most important group of goods.
“Now the British automotive industry can regain confidence,” said Lehnfeld. “The German automotive industry can also benefit from the shift.” Germany is the British country’s most important supplier of fully electric vehicles and hybrids.