Britain’s car industry is facing a “difficult trade-off” between China and Europe, as manufacturers try to balance the benefits of both markets ahead of possible trade measures that could limit UK exports to the EU. The UK stands out for not imposing import taxes on Chinese vehicles, even though the US has almost completely blocked them and the EU charges duties of up to 45%.
EU officials reportedly warned Andy Burnham last month that the UK must put tariffs on cheap Chinese vehicles, or Brussels would impose protectionist “made in Europe” barriers on British exports to the bloc, hurting British carmakers in their largest market. Ministers have so far resisted these calls, with Business Secretary Jonathan Reynolds arguing that any levies would “probably be reciprocated,” costing UK manufacturers sales in China.
Tariffs would also raise prices for British drivers, who have increasingly bought cheaper Chinese models, and could discourage brands such as Chery—which is in talks to build cars at Nissan’s Sunderland plant—from investing further in the UK. “There is a difficult trade-off,” said Emily Sawicz of the consultancy RSM UK, adding that the UK “cannot afford to drift between the two indefinitely.” Chinese investment could be a “lifeline” for carmakers, while access to Europe would also be “crucial” for smaller manufacturers.
“Being excluded risks UK suppliers becoming increasingly shut out of those European opportunities,” she added. “Manufacturers need clarity on which direction the government intends to take so they can make long-term investment decisions.” Ian Plummer, commercial director at Autotrader, said competition from Chinese brands had made cars more affordable and “is encouraging more people to go and buy a new car.”
Brands such as BYD, Omoda and Jaecoo more than tripled their share of the UK new car market in the first eight months of 2026, reaching 12% of sales, according to industry figures. Figures released on Friday showed that British new car registrations rose 12% in the year to September, the best month for annual growth since 2017. Preliminary data from the Society of Motor Manufacturers and Traders (SMMT) showed the boom was driven by demand for electric vehicles and Chinese brands, with the Jaecoo 7 and BYD’s Sealion 7 among the top sellers.
The trade body said on Wednesday that the European Commission’s made in Europe rules, which restrict subsidies, tax breaks and public procurement contracts to vehicles built within the EU, pose an existential threat to British car production. The EU accounted for 58% of UK car exports in the first half of the year, compared with about 4% for China. Mike Hawes, the SMMT’s chief executive, said: “The UK and EU automotive industries are deeply integrated, so effectively excluding British-produced vehicles from their largest market would assure mutual damage.”
Massimiliano Messina, Nissan’s chair in Europe, said last month: “Europe cannot have a Trojan horse where the Chinese are going to flood the market through the UK.” Victor Zhang, the deputy UK chief of Chery, which owns the Jaecoo and Omoda brands, rejected that claim, saying: “Most of what we sell are super-hybrids, not the cars that those tariffs are about, and the cars we sell here stay here.” He added: “Tariffs can come and go, but we won’t change our ongoing investment in the UK.”
Brussels raised its own tariffs on Chinese EVs in 2024, triggering a decline in what was then an accelerating sales trajectory. It is now facing calls for fresh barriers to be imposed on importing hybrid electric vehicles, potentially quotas or price floors. Imports of plug-in and bBattery hybrid car exports surged after the EU imposed tariffs on EVs, highlighting China’s ability to shift its export strategy when facing trade barriers. Some in the industry believe tariffs could help protect UK manufacturers, whose market share in Britain continues to be eroded by Chinese firms. Tim Tozer, a former chair of Vauxhall, said tariffs were “vital” to prevent Britain’s car sector from “atrophying.” He said: “We are at last knockings now, trying to save the industry.” He added that Reynolds was “whistling in the wind” in hoping to continue exporting to China en masse, arguing the market had become “fiercely nationalistic,” with buyers increasingly loyal to domestic brands “because they’re bloody good.”
Frequently Asked Questions
FAQs The UK Car Industrys TradeOff Between the Chinese and EU Markets
1 What is the UK car industrys dilemma between China and the EU
The UK must choose how closely to align with EU trade rules versus building closer ties with China Each market has different rules and pleasing one can upset the other
2 Why does the EU matter so much to UK carmakers
The EU is the UKs biggest export market for cars Being close by and tarifffree makes it the easiest and most profitable market to sell into
3 Why is China important to the UK car industry
China is the worlds largest car market especially for electric vehicles Its also a major source of batteries and parts and Chinese firms like BYD are investing in the UK
4 Whats the basic tradeoff
The EU wants the UK to follow its rules China wants open access and investment The UK cant fully satisfy both
5 What are tariffs in simple terms
A tariff is a tax on imported goods It makes foreign cars more expensive protecting local manufacturers but raising prices for buyers
6 Why is the EU putting tariffs on Chinese EVs
The EU says Chinese EVs are unfairly cheap because of government subsidies Tariffs aim to level the playing field for European carmakers
7 How do these EU tariffs affect the UK
UKmade cars exported to the EU could face extra costs if they contain too many Chinese parts This threatens UK jobs and sales
8 What is the rules of origin problem
Under the UKEU trade deal cars need enough local content to avoid tariffs Chinese batteries and parts can push a car over the limit triggering a 10 tariff
9 Could the UK just copy the EUs tariffs on China
It could but that risks Chinese retaliation against UK exports like cars whisky and luxury goodsand could scare off Chinese investment
10 What happens if the UK stays open to China instead
The UK might attract Chinese EV factories and cheaper cars but could strain EU relations and face pressure to follow EU rules anyway
11 Are Chinese carmakers really investing in the UK
Yes BYD Chery and others are exploring UK sites
