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Europe’s Automakers Laud EU/U.K. Electric Battery Tariff Extension

Europe’s automakers breathed a sigh of relief after the European Commission and the British government agreed in principle to a three-year extension of so-called rules of origin for electric car batteries.

The deal will be put to the EU Council of Ministers next week for formal approval.

Britain’s Society of Motor Manufacturers and Traders had said if no deal was reached a 10% tariff due to have started January 1 would have cost U.K. citizens an extra average £3,400 ($4,300) per electric vehicle. The SMMT, which represents U.K. automakers and suppliers, said EU buyers of British-made battery electric vehicles would face an average increase of £3,600.

This would have been the result if agreement if so-called “rules of origin” contained in the EU-U.K. Brexit deal weren’t extended.

A big winner would have been Chinese companies, said to have a 30% price advantage now.

The European Automobile Manufacturers Association, known by its French acronym ACEA, welcomed the proposed deal.

ACEA urged the Council of Ministers to approve the deal with the U.K., the EU auto industry’s number one export market.

“This is vital to ensure the well-being of not only EU BEV manufacturing but also of the whole European battery value chain,” said ACEA Director General, Sigrid de Vries.

“Failure to approve the proposal would result in reduced competitiveness of our exports. It would also have a negative knock-on impact on demand for European batteries and battery materials, based on lost BEV market share to third-country competitors,” de Vries said.

The SMMT said extending the rules for 3-years would avoid a tariff cliff-edge and allow U.K. and EU automotive industries to continue to sell EVs into each other’s markets without penalty.

During the negotiations, EU members like France weren’t happy, even though failure to change the rules would have hurt Renault of France, and Stellantis’s electric vehicle sales, through its huge Citroen and Peugeot subsidiaries. France was said to believe that agreeing a delay would allow Britain to gain unfairly by thinking it could withdraw from the EU without paying a price.

Stellantis had said its British plants would be shut down unless the extension was agreed.

European Commission President Ursula von der Leyen. (Photo by FREDERICK FLORIN/AFP via Getty Images)AFP VIA GETTY IMAGES

According to Reuters’ Breaking Views column, EU Commission President Ursula von der Leyen’s “leniency” towards the U.K. reflected the need to present a tough front to China, which is subject to an investigation about unfair subsidies on its electric cars now on sale in the EU.

“Brussels originally resisted U.K. calls for a 3-year delay to the rules. But such a hard line would have made Chinese carmakers more competitive in Britain compared to EU peers, who in 2022 shipped nearly £10 billion ($12.6 billion) worth of electric vehicles across the Channel,” Breaking Views columnist Rebecca Christie said.

“By championing the European car industry now – and offering up to €3 billion ($3.2 billion) in new subsidies alongside the tariff-free extension – Brussels will also show it is willing to defend its economic interest as it heads into its first summit with Chinese leaders since 2019,” Christie said.

A China-EU summit will be held December 7 in Beijing, where, according to Reuters, leaders of both sides will discuss strategic and global economic issues of common interest.

Source : Forbes