The European Commission on Wednesday proposed a three-year postponement on tariffs on the sale of electric vehicles between Britain and the EU that was supposed to kick in from January, in a major reversal of its previous position.
The EU body said it now wants a one-off extension until Dec. 31, 2026, after the union's automotive industry raised concerns about the massive costs that would arise from a post-Brexit 10% tariff.
The commission's extension proposal must formally be approved by the EU member states. EU leaders are to hold a regular summit in Brussels next week.
The commission had initially strongly opposed such an extension, despite industry's pleas, requests from the British government and calls for pragmatism by EU lawmakers.
Its extension proposal included wording to make it legally impossible to put off tariffs beyond December 2026.
"Today's decision means that we skip an intermediate phase of somewhat strict rules of origin that would have applied from 2024 until the end of 2026," Commission Vice President Maros Sefcovic said.
"This removes the threat of tariffs on export of EU electric vehicles to the U.K. and vice versa on Jan. 1, 2024."
The change of stance was needed because of "circumstances not foreseen" when an EU-U.K. agreement regulating post-Brexit trade and ties was signed in 2020, Sefcovic said.
He cited higher energy prices spurred by Russia's full-scale invasion of Ukraine last year, high inflation and big subsidies China and the United States deploy to boost their electric vehicle industries.
'Cannot be repeated'
The proposal, Sefcovic said, "supports the competitiveness of our industry and protects jobs in the European Union."
"It's absolutely clear that this one-off extension cannot be repeated nor prolonged thanks to this mechanism," he said.
The EU is particularly concerned about unfair competition from cheaper Chinese electric vehicles. In October, it formally investigated Beijing's subsidies for car manufacturers.
Commission chief Ursula von der Leyen accused China in September of keeping the cost of Chinese electric cars "artificially low by huge state subsidies."
Britain formally left the European Union in early 2021 after reaching the last-minute post-Brexit free-trade agreement with the bloc.
Under that deal, tariffs were to start on Jan. 1, 2024, on vehicles that do not have at least 45% U.K. or EU-made content in them, and with batteries that are at least 50%-60% sourced from each of those territories, under "rules of origin."
Along with the extension proposal, the commission announced additional funding of up to three billion euros ($3.2 billion) to boost the EU's battery manufacturing industry.
The EU's trade commissioner, Valdis Dombrovskis, said the proposal "provides much-needed predictability and stability to EU car- and battery-makers at a time of fierce global competitive pressure."