EU nearing deal with UK to delay post-Brexit tariffs on EVs

The UK and European Union are getting closer to an agreement that could delay the introduction of post-Brexit tariffs on electric vehicles.

Earlier this week, the EU approached Prime Minister Rishi Sunak’s government with proposals that could extend the phasing-in of tariffs on EVs traded between the bloc and the UK for at least two years, according to people familiar with the talks.

Under current arrangements in place after the UK’s withdrawal from the EU, electric vehicles traded between the two starting next year would be subject to a 10% tariff if less than 45% of their value comes from the region. European carmakers have warned those tariffs could cost the sector €4.3 billion ($4.5 billion) and benefit Chinese competitors.

One of the options under discussion is an arrangement that would effectively delay the imposition of tariffs by about two years, the people said.

Talks are ongoing and no final decision has yet been made, with the possibility that discussions drag on for longer, said the people.

Electric vehicles have become a major focal point of global trade tensions in recent weeks as Europe frets that its automakers will lose out to Chinese manufacturers in the transition to less polluting cars. The EU this month launched an investigation of Beijing’s financial support for the EV industry.

The UK government and European carmakers have sought to extend the phase-in period for tariffs by three years, backed by many EU member states including Germany. That possibility remains on the table, according to the people. France has been opposing a delay.

The EU was moving away from its initial position that a delay was not acceptable, and months of work on the issue have started to bear fruit, a UK government official said, requesting anonymity to discuss private conversations.

European carmakers recently dialed up pressure on policymakers to delay the tariffs, saying they could reduce production in the region by 480,000 cars over three years. The European Automobile Manufacturers’ Association is still pushing for a three-year delay rather than a smaller postponement.