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How Britain and Germany gave France a reality check on EV tariffs

EU Electric Cars
EU Electric Cars

For years, Brexiteers described the UK as a “treasure island” worth billions of euros in revenue annually for Berlin’s economy.

The prophecy was one day the German Chancellor would convince Brussels to cave to British demands to protect those sales.

Finally, more than seven years after Britons voted to leave the European Union, that prediction may have finally come true, at least in part.

Under the pressure of German and British carmakers, the European Commission on Wednesday announced a three-year reprieve from Brexit tariffs on electric vehicles traded across the Channel.

European manufacturers had warned the levies of 10pc would hit them with excessive costs, with losses of up to €4.3bn (£3.7bn) and cuts in production of almost 500,000 electric vehicles between 2024 to 2027.

From next year, electric vehicles shipped between the UK and EU were expected to have 45pc of their parts sourced in either market or face the tariff as negotiated as part of the post-Brexit trade agreement.

Germany’s auto industry was vocal in warning that if the rules were enforced on January 1, the whole of Europe, not just the UK, would be put at a significant competitive disadvantage against their Chinese rivals.

Kemi Badenoch had spent the last nine months lobbying for reprieve, bringing the issue up in every single meeting with people from the EU, a source close to the Business Secretary said.

Business Secretary Kemi Badenoch
Business Secretary Kemi Badenoch reportedly lobbied EU officials on every occasion possible to delay the introduction of tariffs - Rasid Necati Aslim/Anadolu

“This isn’t just a UK issue, this is about the European car industry,” she told them, according to the insider.

But France stood in the way of Britain being offered relaxed trade terms, with Paris arguing any delay to tariffs risked setting a precedent that could be exploited by the UK to secure further changes to the Brexit deal.

“The French think it’s better to pull the plaster off now,” a European source told the Telegraph, referring to Paris’ desire to get the impacts of Brexit on both sides of the Channel over and done with.

There is still no guarantee that France will support the prospective deal with Britain to postpone the introduction of tariffs which are due to impact electric vehicles.

A qualified majority vote of the 27 member states, where countries’ voting weights depend on their size, is required to sign off on the deal.

With Germany, worth 18.5pc of the 65pc pass rate, and 20 other EU capitals on board, officials believe the French opposition is irrelevant.

However, Maros Sefcovic, a Commission vice-president who brokered the deal, was keen for France not to be disheartened by its perceived defeat to Britain.

Announcing the agreement in Brussels, Mr Sefcovic, a seasoned negotiator, painted the decision as being vital for European carmakers, not their counterparts in the UK.

“First and foremost, what I really would like to say here is that this decision is very much taken from the point of view of European industrial interest,” he told reporters in a news conference on Wednesday.

He added the continent’s carmakers had faced “enormously difficult moments” because of the war in Ukraine, high energy prices and inflation, as well as subsidy schemes from international competitors, a nod to handouts to Chinese producers by Beijing.

Maros Sefcovic
Maros Sefcovic sought to frame the delay as being firmly in the best interest of Europe's auto industry - RONALD WITTEK/EPA-EFE/Shutterstock

The announcement was coupled with an offer of €3bn in subsidies for Europe’s electric vehicle and battery industries.

“We want to preserve that market access, make sure that we have a very strong position globally and also in our largest export market as China is indeed increasing its market share and it is doing so increasingly through unfair practices,” an EU official said.

Diplomats said the subsidy package was drawn up in order to secure French backing for the delay to tariffs on electric vehicle trade between the UK and EU.

The Commission also proposed a clause making it legally impossible, for either Brussels or Britain, to extend the rules again in three years’ time – another ploy to ease Paris’ concerns over rewriting the Brexit trade treaty.

But Rishi Sunak’s role in the deal should also not be overlooked, insiders made clear.

The Prime Minister is credited with putting an end to the combative approaches of Boris Johnson, Lord Frost, the former Brexit secretary and Liz Truss, in favour of a more constructive relationship with Brussels.

He signed the Windsor Framework to replace the Northern Ireland Protocol, a deal that had created a trade border in the Irish Sea, and he’s since overseen Britain’s rejoining of the bloc’s €95.5bn Horizon research programme.

“Of course, with the UK, we very much appreciate the improved atmosphere since the Windsor Framework was adopted,” Mr Sefcovic said in response to a question by the Telegraph.

The Commission vice-president later broke into a smile when asked about his relationship with Lord Cameron, the Foreign Secretary, as he stood centre stage in the press room of the organisation’s Berlaymont headquarters.

The pair have a long-standing history of working together on projects from Cameron’s time as prime minister.

“I was smiling because it was indeed not my first meeting with Cameron,” Mr Sefcovic said of their lunch in Brussels last week.

They had spent many an hour working together on plans for the EU’s green transition and the conclusion of the Paris Agreement at the Cop 21 climate summit, while Britain was still a member of the bloc.

With Cameron’s shock appointment as Foreign Secretary, Mr Sefcovic is now his main interlocutor on issues relating to the UK’s relationship with Brussels.

Still to be completed are deals on Gibraltar, fishing rights and electricity market access.

“We’ve exchanged phone numbers, we are texting each other and I think we have a very good working relationship,” Mr Sefcovic concluded.

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