The EU and UK automotive industries have, for the second time, called on the European Commission to postpone the introduction of tariffs on electric vehicle imports. Due to a number of factors, such as the COVID-19 pandemic and the Russia-Ukraine war, the automotive industry has been unable to scale up domestic component production.
This is reported by The Guardian.
The problem lies in the so-called rules of origin. From 1 January 2027, cars can only be sold between the EU and the UK provided that a significant proportion of their value and batteries are manufactured in Europe:
- at least 55% of the electric vehicle’s value;
- 70% of the battery pack;
- 65% of the battery cells.
Plans have not materialised
Just a few years after the Brexit trade deal was signed in 2021, it was planned that 30% of batteries would be manufactured in Europe. Therefore, the future increase in import duties was only intended to accelerate the development of this sector.
However, by 2023 it became clear that the European automotive industry would not meet the challenge. This was partly due to COVID, and partly to the semiconductor shortage caused by Russia’s invasion of Ukraine.
At that time, under pressure from automakers, the European Commission had already agreed to postpone the tariff increase on imports until the start of 2027. Now, automakers state they will still be unable to meet the requirements by that date. According to industry estimates, instead of the anticipated 60% of batteries produced in Europe, the figure will be less than 20%.
“The United Kingdom and the EU must now find a pragmatic solution that will avoid self-destructive tariffs on exactly the vehicles consumers are being encouraged to buy, while also protecting investments in domestic battery manufacturing capacity,” emphasized Mike Hawes, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT).
The China factor
The development of European battery manufacturing is under pressure from China. The People’s Republic of China almost completely controls critical raw materials, primarily lithium.
At the same time, through mass production, China has achieved incredibly low battery prices. In Europe, batteries end up being 30% more expensive, which hits the competitiveness of domestic producers.
Despite legislative incentives from the European Commission, the development of the battery industry is extremely expensive and time-consuming. For example, opening a lithium mine and building a full production chain takes years and requires investments of around $750 million. These figures were provided by Stefan Scherer, who heads the only lithium plant in Europe.
Overall, Europe is concerned about overproduction in China, which could trigger a crisis for local industry. This topic will be one of the main issues at the European leaders’ meeting on June 18.
EcoPolitic previously reported that due to the fuel crisis, Europeans are increasingly purchasing electric vehicles instead of gasoline or diesel alternatives. In March alone, sales of electric vehicles increased by one and a half times.
Earlier, it became known that the European Commission began to block funding for "green" energy projects that include Chinese components. This is linked to national security risks.
