Carmakers could be in line for a reprieve after it emerged that Germany is backing calls to postpone tariffs on electric vehicle sales between the UK and the EU.
Manufacturers in the UK and on the continent face the prospect of 10% levies on new electric vehicles that cross the Channel from January under the post-Brexit trade deal agreed between Britain and the bloc in 2020.
However, the German government now supports calls to the European Commission (EC) for a three-year delay to the tariffs, the Financial Times reported.
The three-party coalition in the EU’s largest economy has been debating the matter after calls from carmakers to delay the measure, and the German chancellor, Olaf Scholz, has reportedly made the final decision.
British vehicle manufacturers, and Rishi Sunak’s government, will hope the German intervention is enough to convince the EC to delay the tariffs.
The managing director of Vauxhall, owned by the global manufacturer Stellantis, on Thursday said tariffs could push consumers away from electric cars. Stellantis, Ford, and JLR, the maker of Jaguars and Land Rovers, have previously criticised the timing of the tariff move.
Critics of the changes argue a swift introduction of the new rules will undermine Britain and Europe’s efforts to compete with Chinese electric vehicle manufacturers.
Under the proposals, carmakers will face tariffs unless they have enough UK or EU content, adding thousands of pounds to the cost of new cars that do not comply. The “rules of origin” state that 60% of the value of an EV’s batteries and 45% of its overall parts must be sourced from the EU and the UK to avoid the tariffs.
This will prove difficult as the industry is still heavily reliant on components for electric vehicles derived from electric battery “gigafactories” in China. Efforts to build gigafactories in the UK and Europe have been slowed down by the disruption during the coronavirus pandemic and its aftermath, which has made getting everything from financing to raw materials more difficult.
David Bailey, a professor of business economics at the University of Birmingham, said: “The irony is that rules designed to help build an EV supply chain in Europe could end up damaging the very industry they seek to protect by allowing Chinese imports to undercut UK- and EU-made EVs.”
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The EC has said that the “rules of origin aim to support the EU’s strategic objective to develop a strong and resilient battery value chain in the EU”.
The German move comes amid a thawing in relations between the UK and the EU, exemplified by the UK rejoining the £85bn Horizon Europe research programme this week.
Britain’s electric vehicle industry has also been buoyed by the Jaguar Land Rover owner Tata Group’s £4bn pledge to build a gigafactory in the UK, which is likely to be in Somerset. Meanwhile, Ellesmere Port’s Vauxhall factory began production this week at the UK’s first factory dedicated purely to producing electric vehicles at scale.
