Electric Vehicle Tariffs between EU and UK: European Carmakers Warn of Huge Losses
European carmakers face losing €4.3bn ($5bn) and cutting production of almost 500,000 electric vehicles if the EU refuses to delay tariffs between the EU and UK. China would be the main beneficiary if the EU decides to oppose the British proposal to delay the imposition of tariffs from 2024 to 2027. Starting next January, the shipment of electric vehicles between the UK and the EU are subject to tariffs of 10%. At least 45% of their parts by value must come from within the two regions under the terms set out in the Brexit post-trade and cooperation agreement. However, the industry needs more time to establish a European supply chain to manufacture batteries.
EU-based companies could pay €4.3bn in tariffs, lose sales between 2024 and 2027, and see a decline of around 500,000 people if there is no postponement. Acea General manager Sigrid de Vries stated that the UK is the leading export market for European car manufacturers, and a quarter of electric cars go the UK. Maroš Šefčovič, the European Commissioner responsible for relations with the UK, insists that the bloc would encourage automakers to invest in domestic battery production capacity, and asked Acea for probable damage estimates to the sector.
De Vries adds that the US has offered substantial subsidies to vehicle makers to produce battery and electric models that make Europe less attractive. Investment plans in Europe have been hindered by energy and raw material prices, particularly the Russian invasion of Ukraine. The COVID-19 lockdowns of the previous years disrupted supply chains, affecting the industry. If the EU refuses to postpone the tariffs, China would be the big winner.
Stellantis, which includes brands such as Peugeot and Fiat, said it could shut down its UK van factory if tariffs come into effect next year. Furthermore, the EU sends more cars to the UK than vice versa, and as such, would pay more. Ministers from the UK have held talks with their EU counterparts and privately stressed that the postponement benefits both sides. In 2022, the EU exported around 139,000 electric vehicles to the UK worth €5.1bn, and the Acea anticipates a considerable increase in UK exports as manufacturers start to sell zero-emission products as of next year.
Expanding on The Issues Affecting Europe’s Electric Vehicle Industry
The rise of electric vehicles has become the topmost priority of policymakers across the globe to reduce carbon emissions from fossil-fueled vehicles. Despite the benefits, such as lower operating costs, reduced maintenance, quietness, and environmental compatibility, the electric vehicles sector faces thorny challenges. In Europe, the electric vehicle industry’s growth progress is slower than anticipated due to several factors such as the delay in battery development, limited charging infrastructure, and the COVID-19 pandemic’s impact.
In 2021, electric cars made up only 5.7% of the EU’s auto sales. Despite increasing EV sales, the EU struggles to build the charging infrastructure necessary to accommodate the increasing demand for EVs. Moreover, the slow development of domestic battery production in Europe is another significant impediment to the EV industry’s growth. To remedy this problem, Europe would need to invest in the construction of more production facilities and increase its lithium mining activities.
Another challenge Europe’s EV sector faces is the limited access to rare earth metals, which are critical components of batteries, electric motors, and other technologies employed in EVs. According to the European Commission, EU countries rely mostly on imported raw materials, particularly cobalt and lithium, which is mostly mined in China, Congo, and Australia. The EU aims to increase its control over key raw materials by setting an ambitious goal to establish a sustainable battery industry covering the entire supply chain. However, the process is slow, challenging, and costly, requiring significant time and resources.
The electric vehicle industry’s growth in Europe is hindered by many factors, including challenges around the availability of charging infrastructure, the delay in building battery production facilities, and the increased tariffs imposed by the EU and UK. The instance of tariffs only exacerbates the supply chain pain points that carmakers are already struggling with. The penalties levied on battery electric vehicles and some plug-in electric vehicles would anger European car firms selling cars in the UK, which will hurt their sales and cause job losses.
The European EV industry needs more time to develop and create a viable local supply chain to avoid relying on imports from China, Japan, and South Korea. Furthermore, the Europe region has been consistently outpaced by China in the EV manufacturing segment, where it already has found its footing. The COVID-19 pandemic also slowed down electric vehicle sales, creating uncertainty for automakers. European manufacturers must focus on investing in domestic battery production to lessen the industry’s dependence on imports and speed up the EV industry’s growth.
Summary:
European carmakers warned that shipments of electric vehicles between the UK and the EU were subject to tariffs of 10% beginning January 2022 unless at least 45% of their shares by value come from within the two regions. The European car industry faces a loss of €4.3bn and may cut the manufacturing of almost 500,000 electric vehicles if Brussels disagrees with a UK request to delay the changes from 2024 to 2027. Acea group requested a delay, citing the need to transition from batteries imported from China, Japan, or South Korea and invest in domestic battery production capacity. The industry needs more time to establish a supply chain in Europe, said Acea general manager.
Article Supporting Europe’s Electric Vehicle Industry:
Electric vehicles are environmentally friendly and provide a wealth of benefits, but their growth progress is slower than initially expected in Europe. Many factors contribute to the challenges hindering growth, such as the delay in battery development, limited charging infrastructure, and the COVID-19 pandemic’s impacts. Beyond these, however, lie doubts over Europe’s ability to secure enough raw materials to establish a sustainable battery supply chain. The EU is deeply concerned about the supply chain’s security and sustainability; hence, it launched a strategy in 2020, identifying key actions along the lithium-ion battery value chain. However, the regulatory environment impedes the process.
Europe’s automakers must focus on investing in domestic battery production to lessen the industry’s dependence on China and speed up the electric vehicle industry’s growth. European manufacturers will be critical in creating a sustainable battery industry that covers the entire supply chain, including unearthing raw materials, processing, and battery production. To attain this, Europe needs to invest in digital and clean technologies across the economy, better production facilities, and skills.
Bilateral Relationship:
The EU and the UK must work together to establish a common investment plan to create sustainable value chains. As negotiations proceed, policymakers must prioritize both economic and environmental sustainability and work collaboratively to ensure this industry’s growth in Europe. Furthermore, policymakers must ensure that the electric vehicle supply chain is transparent and ethical, setting a standard that other global regions can emulate. Achieving this goal necessitates establishing a healthy relationship between the EU and the UK that emphasizes cooperation, transparency, and sustainability.
Conclusion:
The growth of electric vehicles is disruptive and represents a paradigmatic shift in power in the automotive industry. Though it is vital to curb carbon emissions, enable sustainable transportation, and create a greener future, Europe’s EV industry faces numerous challenges. It is imperative then to re-evaluate the industry to address these issues and ensure continued growth. Europe’s automakers must work together with policymakers to establish common goals that promote economic growth, promote environmental sustainability, reduce dependence on foreign imports of raw materials and accelerate the industry’s growth.
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European carmakers have warned they will lose €4.3 billion and cut production of nearly 500,000 electric vehicles unless Brussels agrees to delay imposing tariffs between the EU and the UK.
The European Automobile Manufacturers Association (ACEA), an industry group, said China would be the main beneficiary if the European Union disagrees with a British request to postpone the changes from 2024 to 2027.
From next January, electric vehicles shipments between the UK and the EU are subject to tariffs of 10%, unless at least 45% of their shares by value come from within the two regions, under the terms set out in the post trade and cooperation agreement -Brexit (TCA).
But Acea says the industry needs more time to wean off batteries that are still imported from China, South Korea or Japan, despite a push to build factories in Europe.
“Money is being spent supporting electrification and the building of a European supply chain is accelerating. But it needs time. We have all been too optimistic,” Acea general manager Sigrid de Vries told the Financial Times. “We are not asking to change the TCA. . . we just need more time.
He said the group estimated EU-based companies would pay €4.3 billion in tariffs and lose sales between 2024 and 2027, resulting in a drop of around 500,000 people. vehicles Done. “The UK is the number one export market for European car manufacturers. A quarter of electric vehicles go to the UK,” she said.
Maroš Šefčovič, the European commissioner responsible for relations with the UK, said in May that the bloc would not budge because it wanted to encourage automakers to invest in domestic battery production capacity. But he asked Acea to present evidence of probable damage to the sector.
The commission said it had “noted Acea’s estimates” but defended the TCA rules as a means of “developing a strong and resilient battery value chain in the EU”, according to a spokesperson. “Any issue relating to the TCA and its functioning can be raised by either party in the bodies set up by the TCA.”
The level would be set at 22% of car sales and 10% of van sales in 2024, rising sharply to 52% and 46% respectively by 2028.
De Vries pointed out that the US has also offered huge subsidies to vehicle makers to produce battery and electric models under the Biden administration’s $370 billion Inflation Reduction Act, making Europe a less attractive option. .
Investment plans in Europe were also held back by the Russian invasion of Ukraine, which drove up energy and raw material prices, and in previous years by the lockdowns due to Covid-19 which disrupted supply chains .
Without a postponement, China would be the big winner, De Vries said.
He said models made there are paying tariffs but can already beat EU rivals, which have a higher cost of production and less access to the critical raw materials used in batteries. In the UK, Chinese-made vehicles accounted for a third of electric vehicle purchases in 2022, 15 times the proportion in 2020.
“You are giving sales in China by imposing these tariffs. The lost market share is very difficult to recover,” said De Vries.
Stellantis, which owns brands including Peugeot and Fiat, has already said it could close a van factory in the UK if the tariffs come into effect next year. But the EU sends far more cars to the UK than the other way around, and would therefore pay more.
UK government ministers have held talks with their EU counterparts and privately stressed that a postponement would benefit London and Brussels.
Last year, the UK sold 47,000 electric vehicles to the EU, worth €1.2 billion.
The EU has slightly increased its market share since Brexit to around 47%. In 2022, it exported 139,000 electric vehicles to the UK worth €5.1bn, which would amount to €510m in tariffs once they take effect. But Acea expects a sharp increase in UK exports as binding targets for manufacturers to sale of zero emission vehicles they will start in Great Britain next year.
https://www.ft.com/content/6495e8fd-f4a9-49a6-97f6-b705a87d0d3e
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