The Guardian has obtained information that the European Commission has developed confidential backup plans, referred to as “Plan B,” to lessen the effects of a potential 10% tax on electric vehicle imports and exports.
On Monday, the suggestion was given to countries who are members of the EU. This was in reaction to demands from car manufacturers to alter certain terms that were put in place when the UK departed from the EU in January 2021.
The commission is worried that lifting the tariff, even temporarily, would violate the Brexit trade and cooperation agreement (TCA) and would necessitate renegotiating the deal, which it strongly opposes.
The working group for the UK has proposed a plan to introduce a set of “cushioning measures” to lessen the effects of the 10% tariff that is scheduled to take effect on January 1, 2024.
The primary suggestion is to prolong the validity of the 2023 official “certificates of origin” that are required for exporting cars until 2024. This would ensure that any electric vehicle ordered in 2023 but delivered in 2024 would meet the 2023 regulations, where no tariff was applied.
The extension may provide manufacturers with some relief, as electric vehicles have lead times of up to six months.
However, the automobile sector, which initially requested for the tariff to be removed in March, is currently advocating for a three-year halt of the tariff.
As per the Brexit trade agreement, starting from January 1st, any electric vehicle that is traded between the EU and UK must have at least 45% of its components manufactured in either the EU or UK. Otherwise, it will be subject to a tariff. Since the battery makes up a significant portion of an electric vehicle’s cost and most batteries are currently imported from China, manufacturers are in a race to establish battery production capabilities within the EU in order to avoid these tariffs.
Carmakers in Britain and across the rest of Europe, including Stellantis, Ford, BMW JLR, Volkswagen, Volvo, and Mercedes-Benz, have all called for the tariff to be suspended for three years to allow time for new battery factories and their associated supply chains to get up and running.
On Wednesday, Luca de Meo, the CEO of Renault and president of ACEA, warned that not removing the tariff could result in significant financial losses for the European automobile industry.
Germany and other nations that rely heavily on car production are in favor of halting the tariff, while France contends that this would require revisiting the TCA and gaining support from all 27 member states.
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According to De Meo, there have been significant attempts to convince France that reaching an agreement on tariffs does not equate to revisiting the trade agreement. These efforts have been escalated to higher levels of authority due to the significance of the issue at hand.
According to a source in the car industry, a decision needs to be made immediately. The current state of the relationship between the EU and UK is very last minute. We are already at the end of November and there is great concern about the situation.
The commission has only given an oral presentation of their proposal, and member states are anticipated to give their response once it is put into writing. There are concerns that the commission’s “cushioning measures” may face legal challenges.
Source: theguardian.com
