British Auto Industry Pleas For EU Tariff Delay

British Auto Industry Pleas For EU Tariff Delay.

“if the rules are not delayed both the EU and U.K. competitiveness, transition to BEVs and net zero ambitions will be jeopardized”

Britons face an extra charge of an average £3,400 ($4,135) per electric vehicle if the European Union fails to postpone a 10% tariff due to start January 1.

The Society of Motor Manufacturers and Traders (SMMT), which represents U.K. automakers and suppliers, said EU buyers of British-made battery electric vehicles (BEVS) would face an average increase of £3,600.

This will happen if agreement on so-called “rules of origin” contained in the EU-U.K. Brexit deal aren’t delayed or cancelled. 

Both sides are close to agreement on a 3-year delay but EU members like France aren’t happy, even though failure to change the rules would hurt Renault of France, and Stellantis, through its huge Citroen and Peugeot subsidiaries. France is said to be unhappy that agreeing a delay would allow Britain to gain unfairly by thinking it could withdraw from the Single Market without paying a price. 

The Brexit deal calls for BEVs to have 45% EU or U.K. content from 2024, with a 50 to 60% requirement for their battery cells and packs, or face U.K. or EU import tariffs of 10%. The problem is, British and European supply chains for BEVs are not yet advanced enough for them to meet these rules.

Stellantis has said British plants will be shut down unless the Brexit deal is changed. 

Perverse outcome
The SMMT said if agreement is not reached on delaying or cancelling the tariff, the perverse outcome will be a gift to Chinese BEV makers, while it will also give a hidden subsidy to sales of internal combustion engine (ICE). Sales of new ICE vehicles are in the process of being run down until they are eliminated in 2025. 

 SMMT CEO Mike Hawes said both the U.K. and EU will be losers if the tariff plan is not delayed.

“Unnecessary, unworkable and ill-timed rules of origin will only set back the recovery and disincentivize the vehicles we want to sell. Not only would consumers be out of pocket, but the industrial competitiveness of the U.K. and continental (European) industries would be undermined,” Hawes said in a statement.

The SMMT said if the rules are not delayed until 2027 both the EU and U.K. competitiveness, transition to BEVs and net zero ambitions will be jeopardized. 

 “With almost half (49.1%) of all new BEVs registered in the U.K. in the first half of the year coming from the EU, any cost increase would act as a barrier to uptake, undermining their competitiveness in an important and growing market. Furthermore, the application of a 10% tariff on electrified vehicles alone would undermine shared ambitions to be global leaders in zero emission mobility, holding back markets and undermining the drive to deliver net zero, given road transport remains the biggest contributor to overall carbon emissions,” the SMMT said in a statement.

Incentivise ICE 
“Conventional petrol and diesel vehicles would escape tariffs, meanwhile, which would have the perverse effect of incentivizing the purchase of fossil fuel-powered vehicles,” the SMMT said.

Britain’s automakers are also required to sell an increasing number of BEVs, starting with 22% of all new car sales in 2024, rising to 80% by 2030.

The European Automobile Manufacturers Association  has said the rules could cost European automakers up to €4.3 billion in tariffs and lost output. 

“Driving up consumer prices of European electric vehicles, at the very time when we need to fight for market share in the face of fierce international competition, is not the right move – neither from a business nor an environmental perspective,” said Luca de Meo, ACEA President and CEO of Renault in a recent statement. 

“We will effectively be handing a chunk of the market to global manufacturers. Europe should be supporting its industry in the net-zero transition as other regions do – not hindering it. There is a very simple and straightforward solution: extend the current phase-in period for battery rules by three years. We urge the Commission to do the right thing,” de Meo said.

The European Commission, the EU’s executive body, is still considering the problem.