UK “will have to follow” EU on Chinese tariffs

Chinese-made EVs will be hit with as much as 38% extra import tax if sold in the EU

The UK “will have to follow” the European Union by imposing additional tariffs on Chinese EV makers, industry executives and watchers have said. However the UK could also exploit the split by encouraging more inward Chinese investment.

On Wednesday the European Commission announced that Chinese-built electric vehicles exported to the EU are to be hit with additional duty rates as high as 38.1% in reaction to investigations concluding that EVs in China benefit from “unfair subsidisation”.

“The UK is going to have to follow,” one senior automotive executive told Autocar. “They can’t not otherwise all the ships will be diverted to the UK.” The extra pressure will be delayed however due to Chinese EV makers needing to build right-hand drive models instead.

“It’s important that the UK doesn’t become disconnected from Europe [on tariffs],” Toyota Motor Europe chief corporate officer Matt Harrison told Autocar on the sidelines of the Automotive News Europe Congress on Wednesday. 

“Our expectation is that the UK will at some point refer Chinese-made EVs to the Trade Remedies Authority,” said Richard Hebditch, UK director of Brussels-based green pressure group Transport & Environment. “The EU decision means that it's more likely to do soon as Chinese would look to make up for fewer sales in the EU by targeting the UK.”

MG parent SAIC is worst hit by the EU’s provisional tariff rates at the maximum 38.1% on top the 10% the company already pays, bringing the total to almost half the cost of a car. That  means MGs will either have to increase prices of its EVs or soak up the additional cost themselves. MG’s combustion-engine or hybrid cars are not affected by the tariffs.

MG has yet to comment officially on the EU tariffs. “There has been no indication to date that the UK will follow,” a spokesperson said.

Also hit was Volvo parent Geely with an additional 20%, and BYD with 17.4%. Other EV makers will either be hit with a the additional 38.1% if they didn’t engage with the EU’s investigation, or 21% if they did. Those in the latter camp include Dongfeng’s eGT New Energy Automotive company, which builds the Dacia Spring.

An investigation whether Chinese EV makers benefit from unfair subsidies can only be raised by Trade Remedies Authority if they receive an application from UK car manufacturers, or in exceptional circumstances, the Secretary of State. As of Wednesday, no application had been received, according to a source with knowledge of the situation.

Likely that would come from automotive body the Society of Motor Manufacturers and Traders. “We will monitor carefully for any adverse impact on the UK market and domestic manufacturers as we await the findings and definitive measures,” the SMMT said in a statement. “Securing our own competitiveness is our most immediate priority, and we look to whoever forms the next government to deliver a long-term strategy, supporting a vibrant market and manufacturing base, that allows the sector to thrive on a level playing field.” 

The secretary of state for transport, Mark Harper, in March told the audience of the SMMT Connected event that the UK will apply “robust measures” to ensure a level playing field for local car makers in the face of increased competition from Chinese EV makers. However the topic is likely to at the bottom of a to-do list during the election period.

Reasons for the UK to not increase tariffs include the fact that Chinese car makers including Geely and SAIC are already invested in the UK. Geely owns the London taxi company LEVC and Lotus, while MG has 150 dealers employing large numbers.

“I think that the UK might well position itself differently from that of Europe and embrace Chinese investment,” Jonathan Davenport, senior analyst for advanced manufacturing and transportation for consultants Gartner in the UK, told Autocar. So the squeeze brought about by Europe’s decision could be a win-win for Chinese-UK automotive relations and see further investments in the region.”

Chinese EVs took 32% of the UK electric vehicle market in 2022, according to T&E figures.

This year the MG4 was the UK’s third-biggest selling EV to the end of May, with the Tesla Model Y number 1. Right hand drive versions of Teslas have recently been built in the company’s Shanghai plant. Tesla was named by the European Commission as a carmaker who might be given bespoke treatment when it came to the tariffs.
Also building EVs in China are BMW, which imports the IX3, new Mini Cooper EV and new Mini Aceman from the country. Mini makes EVs in a joint venture with Great Wall called Spotlight while BMW works with Brilliance (BBA). Spotlight was not mentioned in the list of companies who complied with the EU investigation while BBA was.

The Volvo EX30, the UK’s eighth best-selling EV to the end of May, is also made in China but will move to Brussels, Belgium next year.

Currently no mainstream EVs are built in the UK but in August Nissan will start pilot production of the new Leaf crossover in its Sunderland ahead of sales next year. The company has also said there will be electric versions of the Qashqai and Juke in the plant. Mini will also reshore the Cooper EV in 2026, while JLR will start production of the first electric models in its Halewood plant next year.

The European Union’s action on Chinese EVs has been actively opposed by German car makers, who are worried about retaliatory duties. China has threatened to raise tariffs on imports of large-engine combustion vehicles, which are a large source of profits for premium brands especially. 

Any potential move by the UK to match EU tariffs could threaten JLR’s imports of high profit Range Rovers into China. The Defender would be directly in the line of fire of retaliatory tariffs in reaction to the EU’s move because its’s made in Slovakia.

The European Commission has said it will enter discussions with Chinese authorities before imposing the additional tariffs, in which they will seek an “effective solution”. It didn’t say what solution that would be. One potential solution could be for car makers like SAIC and BYD to bring forward their plans to build in the European Union, or to restrict the number of cars they export.

If no solution is found, preliminary duties will be imposed from 4 July.