News that the European Union (EU) plans to impose substantial tariffs on imports of cars from China will have sent a shiver of anxiety through the UK automotive market, particularly the retail sector.

The influx of Chinese brands to the UK has been the major news within UK automotive over the last couple of years, the manufacturers aggressively signing up dealers to sell what are generally good quality, well-specified and affordable vehicles. And almost all of the Chinese newcomers are electric, putting them firmly on the radar of fleet managers and leasing operators.

If, however, the next UK Government were to follow the EU’s lead and impose similar levels of tariffs, the Chinese expansion in the UK could very quickly be priced out of contention.

When she was elected in September last year the new EU president Ursula von der Leyen announced an investigation into imports of Chinese vehicles, on the basis that the brands are both heavily state subsidised and have the capacity to to expand rapidly across the globe and sell their vehicles cheaper than the domestic opposition.

Unlike the US, which recently increased tariffs on the very small number of Chinese cars arriving on its shores from 25 to 100%, some observers expect the EU tariffs to raise more proportionally.

Initial reports stated that tariffs could vary widely, principally based on the level of co-operation that Chinese brands provided to the EU enquiry. The top tariffs could be 38%, with companies such as Geely facing a 20% hike and BYD 17%.

However some observers predict that EU tariffs could rise from the current 10% to around 25%, which would effectively bring Chinese car prices into line with European ones. The rates are predicted to be imposed from 4th July but with opportunities for negotiations beforehand.

A wrong move?

The situation is far from simple and many observers fear that the EU’s move could backfire. Western brands are increasingly making their own cars in China, prime examples including Tesla and BMW with such models as the latest Mini and the iX3.

All these vehicles would be subject to the tariffs – according to some reports Chinese-built new Mini models could attract the highest 38% tariff because BMW did not provide enough information to the EU investigation.

China could also respond by hiking its own tariffs on the large number of European cars sold in the country, which could be a prime reason why European manufacturers are not exactly cheering the EU move.

Volkswagen has said that the negative aspects of imposing tariffs would outweigh any advantages and others arguing against include Mercedes-Benz and Stellantis, owner of the Vauxhall, Peugeot, Citroën, Fiat and Alfa Romeo brands.

Of course the UK does not have to tow the EU line – the fact that we are masters of our own destiny could be seen as a rare example of a benefit gained from Brexit – but some observers believe not to do so could leave Britain out in the cold and vulnerable, while our being outside the EU could also have other disadvantages.

If, for example Chinese manufacturers are minded to sidestep the tariffs by opening production plants within the bloc – as some indicated they plan to do even before the tariff plan was announced – then they are much more likely to choose Europe for their investment rather than the UK due to its Brexit-created trading complications with the EU.

Growing fast

The Chinese expansion into the UK has ramped up pretty quickly over the past year or so. BYD launched its first three models onto the market in the space of months, and established a 31-strong dealer network to sell them – this is expected to grow to 80 outlets by the end of 2024.

Omoda and Jaecoo, owned by Chery, China’s largest vehicle exporter, is only just launching its first model but already has 60 dealers in place and intends to grow to 100 outlets by the end of 2024 and 180 a year later – by which time they will be selling nine different vehicles.

The Chinese brands are also finding rapid acceptability because they are not the typical budget vehicles buyers might expect. The cars offer quality alongside their affordability – the MG4 has racked up a host of awards since going on UK sale in 2022, and the BYD Seal was placed sixth in the much-prized 2024 European Car of the Year voting.

Meanwhile private EV sales are currently stuttering and while the outgoing Government has in recent times rolled back on its electric intentions, it still expects by 2035 all new car sales to be of electrified models. Moves such as pricing out some of the most affordable offerings on the market will make achieving this target increasingly unlikely – and Labour has said that if elected it will reimpose the original planned switch date of 2030, just six years away….

No need for quick moves

Many in UK automotive are keeping their counsel for now, waiting to see what happens next. But those who were prepared to comment to Business Motoring were generally of the opinion that Britain should hold off making any move on tariffs.

“The EU tariffs for Chinese electric carmakers are likely to lead to an influx of Chinese vehicles into the UK as the country remains one of the most open, large consumer markets left,” said Sue Robinson, Chief Executive of the National Franchised Dealers Association (NFDA) which represents car and commercial retailers across the UK.

“Franchised dealers already work with a large number of Chinese manufacturers and we expect that to only increase as a result of the EU tariffs,” Robinson added.