UK “will have to follow” EU on Chinese tariffs

The UK “will have to follow” the EU 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 EVs 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 for the UK 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 Belgium-based green pressure group Transport & Environment. “The EU decision means that it's more likely to do soon, as Chinese [firms] would look to make up for fewer sales in the EU by targeting the UK.” MG parent firm SAIC is worst hit by the EU’s provisional tariff rates, at the maximum 38.1%, on top the 10% that it already pays, bringing the total to almost half the cost of a car. That means MG will either have to increase prices of its EVs or soak up the additional cost itself. The brand's combustion-engined and hybrid cars won't be affected by the tariffs. MG has yet to comment officially on the EU tariffs, and a spokesperson said: “There has been no indication to date that the UK will follow." Also hit is Volvo parent firm 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 into whether Chinese EV makers benefit from unfair subsidies can be raised by the Trade Remedies Authority only 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 would 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 run-up to the general election on 4 July. 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 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 at consultantcy 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 [induce] further investments in the region.” Chinese EVs took 32% of the UK's EV market in 2022, according to figures from Transport & Environment. This year, the MG 4 EV was the UK’s third-biggest selling EV to the end of May, while the Tesla Model Y was number one. Right-hand-drive versions of Teslas have recently been built in the company’s Shanghai plant. Tesla has been named by the European Commission as a car maker that might be given bespoke treatment when it came to the tariffs. Also building EVs in China is the BMW Group, which imports the BMW iX3, Mini Cooper EV and Mini Aceman from the country. Mini EVs are made by a joint venture with Great Wall Motor called Spotlight, while BMW works with Brilliance. Spotlight wasn't mentioned in the list of companies that complied with the EU investigation but 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 Belgium next year. No mainstream EVs are currently built in the UK, but in August, Nissan will start pilot production of the new Leaf crossover in its Sunderland ahead of sales starting in 2025. The company has also said that future electric versions of the Qashqai and Juke will be built at the plant. JLR will start production of new electric models at Halewood next year and Mini will bring the Cooper EV to Oxford in 2026. The EU's action on Chinese EVs has been actively opposed by German car makers, which are worried about retaliatory duties. China has threatened to raise tariffs on imports of large-engined combustion cars, 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, and the Land Rover Defender would be directly in the line of fire of retaliatory tariffs, because it's made in Slovakia. The European Commission has said it will enter discussions with Chinese authorities before imposing the additional tariffs, in which it will seek an “effective solution”. It didn’t say what solution that would be. One potential solution could be for firms like SAIC and BYD to bring forward their plans to build cars in the EU or to restrict the number of cars they export. If no solution is found, preliminary duties will be imposed from 4 July.