Britain welcomed Chinese electric vehicles with open arms, a stark contrast to the U.S. and EU’s protectionist stance. Now, facing pressure from its biggest trading partner, the EU, the UK must decide whether to impose tariffs on Chinese EVs, balancing post-Brexit trade ambitions with the risk of retaliation from Beijing. This decision is complicated by the rapid market penetration of Chinese brands, not just in EVs but also hybrids, and the underlying cost and supply chain advantages China holds.
While the United States effectively shut its borders to Chinese electric vehicles with a hefty 100% tariff, and the European Union imposed duties up to 35.3%, Britain chose a different path. The U.K., alongside Japan and Norway, stands as one of the few major overseas markets where Chinese EVs face only a standard 10% import duty.
This open-door policy has led to Chinese automakers rapidly gaining ground in the U.K. market. However, Britain now confronts a pivotal choice as the EU's "Made in Europe" proposals threaten to impact U.K. companies selling into the bloc, potentially forcing London to align its tariff policies.
Recent reports suggest U.K. Business Minister Jonathan Reynolds is considering mirroring the EU's levies on Chinese EVs. A U.K. government spokesperson confirmed ongoing engagement with the industry to ensure its approach reflects national interests without confirming immediate tariffs.
The EU's "Industrial Accelerator Act" aims to bolster European industries against what it perceives as unfair international competition, prioritizing European-made goods. An EU official reportedly informed the Financial Times that London might need to increase tariffs and align with EU trade policy to avoid these new barriers.
This decision is delicately poised for Prime Minister Andy Burnham, who seeks to reset post-Brexit relations with the EU. Any move to impose tariffs on Chinese EVs is likely to provoke retaliatory measures from Beijing. The Chinese Embassy in London has already voiced "serious concern" regarding potential tariffs, warning of corresponding responses.
Chinese Automakers' Rapid Ascent in the U.K.
Chinese car brands have seen a dramatic surge in market share across the U.K. Analysis by Jato Dynamics reveals that registrations of Chinese-made vehicles, encompassing both battery-electric and hybrid powertrains, soared to 519,424 between January and August, capturing 28.1% of the total market – a significant jump from 12.9% in the same period last year.
Interestingly, hybrids contributed more to this growth, with 62,655 new registrations compared to 32,565 for battery-electric vehicles.
Paul Hilton, head of retail at Jato Dynamics, highlighted the policy implications: "Tariffs aimed only at Chinese-built battery EVs could slow one part of the expansion, but would not address hybrid growth, vehicles made outside China or the underlying advantages in cost, product cadence and supply chains." He advocates for a comprehensive U.K. response that combines trade remedies with incentives for local production, competitive energy and battery costs, robust charging infrastructure, and skills development, all while aligning with European market access rules.
The 'Temu Range Rover' Phenomenon
Further underscoring China's market penetration, the Jaecoo 7 from China was the U.K.'s bestselling car last month. This mid-size SUV, affectionately dubbed the "Temu Range Rover," starts at approximately £29,000 ($38,350), making it significantly more affordable than a Land Rover Discovery Sport (around £45,500).
In September, the Jaecoo 7 recorded 10,814 nationwide sales, surpassing popular models like the Tesla Model 3, Ford Puma, and Kia Sportage.
Rico Luman, senior sector economist for transport and logistics at ING, noted that the diverging policies between Britain and the EU are leaving the U.K. with limited options beyond tariffs if it wishes to maintain a level playing field with the bloc. Luman warned that exclusion from the "Made in Europe" initiative could have "significant consequences" for existing businesses, making closer alignment with EU trade policy increasingly difficult to avoid.
Luman also found it "quite remarkable" that batteries from China are exempted from EU tariffs, but acknowledges its logic: "production in Europe isn't up to speed and Europe lacks the rare earth minerals and refinery capacity behind it."
