Tariff delay for electric cars: enough to recharge the EV market?

The EU plans to delay a tariff on electric vehicles that could have seen a 10% rise in the cost of many models from January. 

According to The Telegraph, the European Commission will imminently approve the delay of the post-Brexit tariff on electric car batteries sourced outside of the UK or EU, and provide a "boost for vehicle manufacturers on both sides of the Channel".

The news comes as figures suggest that electric vehicle (EV) sales in the UK dived in November, falling by 17.1%, according to the Society of Motor Manufacturers and Traders (SMMT). The slump "outpaced" even the almost 10% drop during the first Covid-19 lockdown, and follows Rishi Sunak's announcement in September that the ban on the sale of new petrol and diesel vehicles would be delayed from 2030 to 2035.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

It was a move criticised by carmakers, who say it will "knock consumer confidence in electric cars", added The Telegraph. The industry is hopeful that delaying the tariff will "remove one dark cloud hanging" over European EV manufacturers, said The Guardian, and enable them to target private consumers without rising costs.

'Grimmer than it looks'

Overall, the new car market "continues to recover" following the pandemic, said SMMT chief executive Mike Hawes. Indeed, the latest figures show new car sales are up 18.6% so far year-on-year and even battery electric vehicles are up overall by 27.5% in the year to November. But that growth is "driven entirely by fleets investing in the latest vehicles", the SMMT said, while "private demand" for EVs remained "depressed" with consumers appearing to move towards plug-in hybrids and petrol cars.

To stimulate growth, private buyers need to be given "incentives" by governments with "sensible steps" taken that will "promote rather than penalise the transition" to EVs, said Hawes. 

Sunak's decision to push back the ban on new petrol and diesel cars is contrary to this idea, said Peter Campbell in the Financial Times. The delay sends a message to consumers that "they can wait for another five years" to invest in EVs. 

That's not the only consequence of the prime minister's decision either, explained Ross Clark in The Spectator. Sunak may have "relaxed" the petrol car ban, but he has "not touched" mandated targets that require 22% of carmakers' production to be EVs. If they fail to do so, they could face fines of "£15,000 per car".

It means the position for manufacturers "is grimmer than it looks", added Clark. Unless they can work out "some way of shifting their electric cars" it remains "hard to see how some of them will be able to continue in the UK market".

'A one-way street to EVs'

This difficult position left carmakers even more "fearful" of a potential levy hitting exports if they failed to begin sourcing batteries, the "most expensive component" of EVs, from within Europe and the UK, the Guardian said. Manufacturers were significantly behind in securing their access to crucial raw materials before the 1 January 2024 target.

The European Commission's potential delay would allow manufacturers to "ramp up local battery production", but will almost certainly be good news for carmakers across Europe who "warned that the policy would hit EVs extremely hard" and lobbied "heavily" against the "looming tariff", said The Telegraph.

The SMMT added that a delay to the tariff would "support consumer choice and affordability", while industry figures had also warned that "subsidised Chinese EV makers would be the only victors" if the tariff was imposed too soon, said the i news site.

Despite the "political headwinds" and the "tightening emissions rules", the "road to EVs" is expected to be a "one-way street", wrote Campbell in the FT. But the way to reach a bigger market share is not only about price but about allaying "motorists' worries" about charging and battery life with "a widescale expansion of the charging infrastructure". While "attracting investors" into that field is "still difficult", there are some operators "ramping up their installations".

The charging network has, in fact, increased by 43% over the past year, according to the government, wrote Clark, which may "go some way to answering complaints" about the barriers to EVs. Nevertheless, "private motorists are showing little interest", he concludes, and it is the "buying public, as much as the cars themselves, which seems in need of a recharge".