France will block a British request to extend a free trade deal on exporting electric cars to Europe amid concerns about Chinese parts.
The British government, backed by carmakers from across Europe, wants to delay Brexit trade tariffs on electric vehicles shipped between the UK and EU.
But a senior French source said that Brussels did not want Britain to be a backdoor for China to flood the bloc with cheap electric vehicles.
Nissan and BMW are investing heavily in electric car manufacturing in Britain, but are dependent on battery parts from China.
The row with the UK comes as a trade war is brewing between Brussels and Beijing. Ursula von der Leyen, the European Commission’s president, promised a tough approach on Chinese imports in her annual “State of the Union” speech.
Britain is asking the EU to push back the implementation of post-Brexit trade rules that are due to enter into force at the end of the year until 2027.
Under the so-called “rules of origin” requirement, electric vehicles shipped from Britain to the bloc must have 60 per cent of their battery and 45 per ucent of their parts by value sourced from either the EU or UK.
After the end of the year, electric vehicles traded across the Channel that don’t meet this criteria will be slapped with a 10 per cent trade levy, despite Britain’s zero-tariff, zero-quota trade deal with Brussels.
French ministers have pushed for the Commission to stick by the plans to impose tariffs from next year amid an effort to make the bloc less reliant on the likes of China and the United States.
“The British want an extension to the deadline until 2027 to continue flooding the EU market with Chinese batteries and thus become a hub in the process,” the French source told The Telegraph.
“A European battle will now ensue. The French position is to say no to the British because it is a question of sovereignty as we want to create a European battery industry and flooding the French market with Chinese batteries would stop it from happening.”
PM has lobbied Mrs Von der Leyen
Prime Minister Rishi Sunak has personally lobbied Mrs von der Leyen in recent private discussions between the pair to relax the bloc’s hardline stance.
And British officials have expressed “extreme frustration” over the lack of progress they’ve had with their European counterparts, according to a source familiar with the discussions.
They’ve complained that Brussels has failed to listen to warnings from both UK and European carmakers, which have said failing to delay the rules could prove to be extremely costly for the industry.
The French source added: “So far, no decision has been made. But the outcome will give an indication of how we envisage future relations with the British.
“We have no economic interest in extending the deadline.”
Despite the French blockage, British officials are hopeful the date will be extended beyond the end of the year.
Industry Minister Nus Ghani earlier this week warned China would be the “biggest beneficiary” if the EU and UK cannot reach a deal on tariffs.
She said the introduction of trade tariffs would open the door to “cheaper imports, potentially Chinese-made cars” to fill the gaps in EU and UK markets.
“There will be impact on not just the UK car industry but also … manufacturers in Europe as well,” the minister told the House of Commons Business and Trade Committee.
European carmakers ‘could lose €4.3bn’
European carmakers have warned that they stand to lose €4.3bn (£3.69bn) and cut production by some 500,000 electric vehicles unless Brussels agrees to delay the implementation of tariffs.
But a Commission spokesman said: “Brexit has changed the trade relationship between the UK and the EU, among other things.
“The Trade and Cooperation Agreement is the outcome of a negotiation in which both sides agreed to an overall balance of commitments. This includes clear terms for rules of origin for cars and other products traded under the terms of the TCA. These rules of origin aim to support the EU’s strategic objective to develop a strong and resilient battery value chain in the EU.”
French President Emmanuel Macron has staked major political capital on transforming his country into a hub for electric vehicle production.
On Thursday, French startup Verkor said it has raised more than €2bn to build a gigafactory for electric car batteries.
The plant is among a clutch of factories set to emerge in northern France under President Macron’s “reindustrialisation” plan for the country.
BMW this year announced it would invest £600m, including a £75m injection from the British taxpayer, to build the next generation of Minis at a plant in Oxford.
While the electric vehicles will be assembled in Britain, the batteries will be sourced from China for the foreseeable future, meaning these cars will not comply with the shifting regulations.
Battery technology is seen as the crucial element in the rollout of electric vehicles, with up to 40 per cent of the car’s value tied up in it, but production is dominated by China.
Japanese manufacturer Nissan announced the creation of a “gigafactory” that would enable its Sunderland car plant to boost the production of electric vehicles.
But for now its Leaf models, produced in the North East, are made in conjunction with batteries from Chinese manufacturers Envision.
UK and EU battery makers ‘undercut’by China
Both producers of batteries in the UK and EU, which have higher production costs and less access to the critical raw materials needed, are being undercut by their rivals in China.
European and British carmakers, as well as the UK Government, have warned failure to delay the introduction of tariffs would only benefit Beijing further.
Because of this, manufacturers are bullish that a deal can be reached.
A BMW spokesman said: “This legislation affects the entire industry and we, like all manufacturers, hope that a successful compromise can be reached as regards this issue.”
Mike Hawes, CEO of the Society of Motor Manufacturers and Traders, said: “Upcoming rules of origin for batteries pose a significant challenge to manufacturers on both sides of the Channel, with the prospect of tariffs and price increases on electrified vehicles that would discourage consumers from buying the very models needed to achieve shared climate change goals.
“With now less than four months until this situation arises, we look to the EU and UK to agree urgently a pragmatic solution to delay the introduction of over-demanding origin requirements for batteries, something which is perfectly possible within the existing UK-EU TCA framework.”