The European Union Hesitant Over Tariff Delay for Electric Vehicles, But UK Carmakers Remain Optimistic

The European Union is facing hesitation regarding an agreement to delay tariffs on the sale of electric vehicles (EVs). However, UK carmakers remain optimistic that a resolution can be reached. Under the Brexit trade deal, EVs traded between Britain and the EU will attract 10 per cent tariffs from January, unless 45 per cent of the vehicle’s value comes from Britain or the EU.

Higher Tariffs and Potential Consequences

Concerns arise as many EV batteries are imported from China, resulting in the tariffs impacting carmakers in Europe and Britain. These tariffs could potentially lead to higher prices for consumers interested in purchasing EVs, hindering efforts to reduce carbon emissions. Furthermore, UK car plants could become uncompetitive if these tariffs are implemented.

Challenges in Reaching an Agreement

The Society of Motor Manufacturers and Traders (SMMT) chief executive, Mike Hawes, expressed the EU’s hesitancy toward accepting Britain’s proposal to postpone the tariffs until 2027. The French government’s stance on the issue remains uncertain, although Germany reportedly supports a tariff waiver.

Mr. Hawes acknowledges the nervousness in Brussels but maintains optimism that an agreement can be reached. He emphasizes the logical approach of avoiding additional tariffs on the very vehicles the government encourages people to buy. However, with the year approaching its end, car companies have likely already made product allocation decisions for the first half of the following year. Therefore, a risk-averse approach will be taken, and it cannot be assumed that an agreement will be reached before then.

Ensuring Competitiveness and Environmental Reforms

Should an agreement fail to materialize, carmakers will focus on ensuring their vehicles remain competitive despite the tariffs, according to Mr. Hawes. Meanwhile, the UK Transport Secretary, Mark Harper, stressed the importance of making significant progress in environmental reforms within road transport to meet the country’s climate goals. He highlighted the need to expedite electrification efforts as it poses the most significant challenge and opportunity to reach net-zero emissions by 2050.

Industry Demands and Tax Incentives

The industry has called for tax incentives to facilitate the shift to EVs. The UK Government plans to phase out the sale of new petrol and diesel cars by 2030 (2035 for hybrids). The Society of Motor Manufacturers and Traders (SMMT) also advocates for tax incentives comparable to those offered through company car schemes for privately owned EVs. Additionally, they urge the government to establish mandatory targets for public charging points and reduce VAT on EVs. The industry further recommends scrapping plans to increase the vehicle excise duty on EVs beginning in 2025.

Conclusion

The European Union’s hesitation over an agreement to delay tariffs on EVs has led to uncertainties for carmakers in Europe and Britain. However, UK carmakers remain optimistic that a resolution can be reached, emphasizing the importance of avoiding additional tariffs on vehicles that help reduce carbon emissions. The industry calls for tax incentives, mandatory public charging points, and lower VAT on EVs as measures to promote the transition to electric vehicles. By addressing these concerns, the government can bolster consumer confidence and ensure that the necessary infrastructure keeps pace with growing demand.