Germany has decided to support UK Prime Minister Rishi Sunak’s proposal to postpone the implementation of tariffs on EV sales between the UK and the EU for three years, the Financial Times reported yesterday.
The final decision came from Chancellor Olaf Scholz, after a heated debate within Germany’s three-party coalition system.
Starting from January, the current post-Brexit trade deal between the EU and UK entails a 10 per cent levy on EV batteries made outside Europe, a cost that is detrimental both to Sunak’s government and the German car manufacturing sector.
The European Automobile Manufacturers’ Association has estimated that the tariff’s consequences on trade across the channel could cost the EU car manufacturing industry €4.3bn and a production cut of almost 500,000 electric vehicles over the next three years.
It is much in European car makers’ interest to support the call to extend the tariff for a three-year period which would allow the region’s supply chain to develop before the implementation of the so-called “rules of origin”. This is seen as essential for the industry as it tries to compete with Chinese battery makers.
Although the European Commission initially declined the request to postpone the tariffs, commissioners are very divided on the issue. Germany, being the EU’s largest state, is likely to exert significant influence over Commission President Ursula von der Leyen.
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On the other side of the channel, UK’s Trade Secretary Kemi Badenoch has been reported to have held productive talks with EU Trade Commissioner Valdis Dombrovskis.
Von der Leyen and UK Prime Minister Rishi Sunak are expected to discuss the issue during the G20 summit in India, which will conclude on 10 September.