Car giants including Renault, BMW and Mercedes-Benz have called on EU leaders to “act now” and delay plans for a 10% tariff on electric car exports from Europe.
Renault’s chief, Luca de Meo, led the calls, saying that if the EU did not take action then policymakers would simply be “handing a chunk of the market to global manufacturers” including Chinese companies, which are making significant inroads.
European and UK carmakers timed their call ahead of this week’s gathering of the joint EU-UK Brexit specialised committees on trade. The tariff is due to be enforced from January, but carmakers in the UK and Europe are pushing to delay its introduction by at least three years.
The European commissioner Thierry Breton last week told the Guardian that the Brexit deal could not be re-opened just to appease some sectors of the motor industry, arguing that he had to ensure there was a level playing field across the entire “ecosystem”.
The formal request to cut the tariff has been made by the European Automobile Manufacturer’s Association (ACEA), which first made submissions about the looming tariff in March.
The introduction of the tariff was agreed in 2020 in the Brexit trade and cooperation agreement when it was envisaged that car giants across the UK and the EU would quickly make significant progress in the manufacture of electric vehicles.
Such was the confidence at the time that both Brussels and London, arguing for the interests of their own motor industries, agreed a “rule of origin” clause, imposing a 10% tariff on any electric car that was less than 45% made in the UK or the EU. But by the beginning of this year the motor industry realised that it would not be able to meet those targets, unable to wean itself off components made in China and elsewhere quickly enough to be sufficiently European or British under the rules of origin.
One of the key problems is the slow progress in producing electric batteries and the lithium hydroxide that powers them.
In Germany, AMG Lithium, the first factory in the EU to make lithium hydroxide, is about to go into production with an order book stretching into 2026.
Its chief executive, Stefan Scherer, said the EU would take years to catch up with Chinese companies because of the lead they have built in this and other chemicals.
European manufacturers said the EU must intervene in the face of “fierce” rivalry.
“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 de Meo.
“Europe should be supporting its industry in the net zero transition as other regions do, not hindering it,” he added. “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.”
ACEA members’ biggest car export market is the UK and it has calculated that a 10% tariff would cost EU car and truck makers €4.3bn over the next three years.
Without a three-year delay to the introduction of the tariff, this cost would have to either be absorbed by the industry or passed on to consumers, they argue, depleting their strength and ultimately threatening jobs in Europe.
The organisation represents most of the big names in vehicle manufacture including Ferrari, Ford, Honda, Hyundai, BMW, DAF Trucks and Daimler Trucks, Jaguar Land Rover, Mercedes-Benz, Renault, Toyota, Volkswagen and Volvo.
In the UK, the Society of Motor Manufacturers and Traders chief executive Mike Hawes said that the levy would “damage the entire automotive ecosystem on both sides of the Channel”.
Stellantis, the owner of 14 big brands including Vauxhall, has made similar submissions in the UK, saying it may have to close down operations in Britain with the loss of jobs if the tariff is imposed. Politicians in Germany, home to a powerful motor industry, are also pushing the EU for a delay.
Carmakers in the EU still account for 70% of all vehicle sales in the bloc but, in the electric car sector, China now accounts for 4% of the market, with manufacturers offering entry-level EVs at under €30,000.
A decision on whether to delay the tariff could be made at the next prime ministers’ summit in early October.