The European Commission’s 11th-hour proposal to delay tariffs on electric vehicle sales between the EU and UK from 2024 has been welcomed by automakers on both sides of the channel.

If the rules go ahead as originally planned, EVs traded both ways would be subject to a 10% tariff – pushing up prices and making both UK and EU OEMs uncompetitive in each other’s markets

Due to take effect from 1 January, the stricter Rules of Origin would have placed higher minimum restrictions on all battery parts and some battery raw materials to ensure they’re locally sourced within the EU or UK, in order to continue to benefit from tariff-free trade between these markets.

Part of the post-Brexit Trade and Cooperation Agreement (TCA), the rules were meant to circumvent cheap imports coming in, but instead would have left electric vehicles that didn’t meet the new thresholds subject to a 10% tariff when traded across the Channel.

This would add billions of pounds in costs, pushing up prices for consumers, and rendering both UK and EU manufacturers uncompetitive in each other’s markets while making imports from other markets more attractive.

EU vehicle makers had also warned the tougher rules would potentially reduce BEV production by some 480,000 units over the next three years, equivalent to the output of two average-size auto factories.

Reports by Bloomberg and the Financial Times had rumoured that Brussels was proposing to delay the current rules until 2027 – and the European Commission announced yesterday that it had proposed a specific one-off extension – until 31 December 2026 – to the council.

However, the EU stressed that it was a “one-off” move – and said the proposal does not affect the TCA’s wider rules of origin which will be applicable as of 2027, as planned, amid concerns that the UK might bargain for other changes. It’s also proposed a clause rendering it legally impossible for the EU-UK Partnership Council to extend this period further, thereby effectively “locking-in” Rules of Origin in force as of 2027.

The Commission has also said it’s setting aside additional funding of up to €3bn (£2.6bn) to boost the EU’s battery manufacturing industry under the Innovation Fund. This will foster faster and more cost-efficient support for the manufacturing of the most sustainable batteries in Member States.

The UK automotive sector welcomed the plan to extend EV trade rules – and urged every government to back it.

The Society of Motor Manufacturers and Traders (SMMT) said extending the rules for three years would avoid a tariff cliff-edge in just over three weeks’ time, allowing the UK and EU automotive industries to continue to sell EVs into each other’s markets without penalty.

Mike Hawes, chief executive, said: “Adopting the Commission’s proposal would be a pragmatic solution, safeguarding the future of the EU and UK automotive industries, supporting motorists, the economy and the environment. Such an extension would avoid damaging tariffs on the very vehicles we need consumers to buy, allow UK and EU manufacturers to compete with the rest of the world and, crucially, give the European battery industry time to catch up. Above all, voting for the proposal will enable us all to cut carbon emissions while supporting growth and jobs across the entire EV supply chain. We urge every party to get behind it.”

On the other side of the channel, the European Automobile Manufacturers’ Associations (ACEA) urged the European Council to approve the proposal, which needs to be passed by a majority of the EU’s 27 member states.

“This is vital to ensure the well-being of not only EU BEV manufacturing, but also of the whole European battery value chain,” explained ACEA director general, Sigrid de Vries. “Failure to approve the proposal would result in reduced competitiveness of our exports. It would also have a negative knock-on impact on demand for European batteries and battery materials, based on lost BEV market share to third-country competitors”

ACEA members reiterated their commitment to supporting the development of an advanced and competitive green mobility value chain in Europe – and stressed that battery production would ramp up significantly over the next years.

“The Commission’s proposal will help bridge the gap between now and the time at which those investments start to produce industrially significant output,” it added.

In the UK, fleet management and leasing firms have also greeted the news.

Jon Lawes, managing director at Novuna Vehicle Solutions, said: “If approved, this breakthrough is a lifeline for the UK and European motor industry. The Rules of Origin tariffs have cast a long shadow over the switch to EVs in the UK and Europe. With UK EV registrations declining in November, the rules threatened to further hit vehicle production costs and dampen EV adoption.”

Tim Buchan, chief executive officer at Zenith, commented: “We welcome this decision, which mitigates what was a very real and immediate challenge for the UK automotive industry.

“As a business, we are fully committed to the transition to battery electric vehicles (BEVs), helping thousands of drivers to make the switch every year. Our funded car fleet is already made up of 45% BEVs.

“Now that extra clarity has been proposed, we hope the industry can use this time to collaborate and work towards improving our local supply chain ready for 2027.”

And Nick Williams, managing director of ​Lex Autolease, part of Lloyds Banking Group​, said: “We welcome this update around the potential delay on EU tariffs at a time when a lot of customers are wondering whether electric vehicles may be impacted.

“If the delay is agreed it will provide certainty to manufacturers around continued EV supply into the UK.

“Longer term, the direction is clear that the UK will become an optimal place to build both vehicles and batteries to counteract the impact of any tariffs after the three-year period. This will also help to ensure that industry and business can continue to plan effectively for an electric future and drive down costs for consumers.”