UK carmakers caught between Chinese imports and EU tariff threat

Chinese brands now hold 12% of UK new car sales

Britain is an outlier in declining to put import taxes on Chinese vehicles, even as the United States has shut them out almost entirely and the European Union imposes duties of up to 45%. UK ministers have so far resisted, with Business Secretary Jonathan Reynolds arguing that any levies would “probably be reciprocated” and cost UK manufacturers sales in China. Tariffs would also raise prices for British drivers, who have flocked to cheaper Chinese models, and could deter brands such as Chery, which is in talks to build cars at Nissan’s Sunderland plant, from investing further in the UK.

EU officials reportedly warned Andy Burnham last month that the UK must put tariffs on cheap Chinese vehicles or face protectionist “made in Europe” rules that would restrict subsidies, tax breaks and public procurement contracts to vehicles built within the EU. The European Commission is preparing those rules, which the SMMT said on Wednesday pose an “existential threat” to British car production.

The pressure arrives as Chinese brands consolidate their foothold in the UK. BYD, Omoda and Jaecoo more than tripled their combined share of the UK new-car market in the first eight months of 2026, reaching 12% of sales, according to industry figures. Preliminary data from the SMMT showed British new-car registrations rose 12% in the year to September — the best month for annual growth since 2017 — with the Jaecoo 7 and BYD’s Sealion 7 among the top sellers.

Ian Plummer, commercial director at Autotrader, said the competition from Chinese brands has made cars more affordable and “is encouraging more people to go and buy a new car.” But the upside for consumers is matched by a vulnerability for UK-based manufacturers, whose own market share continues to be eroded by Chinese rivals.

The trade-off is sharpened by the structure of British car exports. The EU accounted for 58% of UK car exports in the first half of 2026, compared with about 4% for China, according to the SMMT. Mike Hawes, the trade body’s chief executive, said the UK and EU automotive industries are “deeply integrated,” and effectively excluding British-produced vehicles from their largest market would “assure mutual damage.”

Industry voices are split on which way the government should move. Emily Sawicz, of the consultancy RSM UK, said there is a “difficult trade-off” and that the UK “cannot afford to drift between the two indefinitely.” She described Chinese investment as a potential “lifeline” for carmakers, while access to Europe would be “crucial” for smaller manufacturers, adding that being excluded risks UK suppliers becoming “increasingly shut out of those European opportunities.”

Others argue that tariffs are necessary to defend what remains of British production. Tim Tozer, a former chair of Vauxhall, said duties were “vital” to stop Britain’s car sector “atrophying,” and described the UK as being at “last knockings now, trying to save the industry.” He said Reynolds was “whistling in the wind” with hopes of continuing to export to China en masse, arguing the Chinese market has become “fiercely nationalistic,” with buyers increasingly loyal to domestic brands “because they’re bloody good.”

The European market is where the consequences would land first. The EU raised its own tariffs on Chinese EVs in 2024, triggering a decline in what had been an accelerating sales trajectory. It is now facing calls for fresh barriers on hybrid electric vehicles, including possible quotas or price floors. Imports of plug-in and battery hybrid cars rocketed after the EU tariffs were imposed on EVs, underlining China’s ability to pivot its export strategy when confronted with trade barriers.

Chinese investment is already reshaping British production lines. Chery, the Chinese automaker that owns the Jaecoo and Omoda brands, is in talks to build cars at Nissan’s Sunderland plant. Massimiliano Messina, Nissan’s chair in Europe, said last month that “Europe cannot have a Trojan horse where the Chinese are going to flood the market through the UK.” Victor Zhang, Chery’s deputy UK chief, rejected that framing, 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.”

For now, Reynolds’s position is to keep tariffs off the table. But the EU’s “made in Europe” rules, the prospect of further hybrid tariffs and the continued growth of Chinese-brand sales in the UK are all narrowing the window in which the trade-off can be deferred. Sawicz said manufacturers “need clarity on which direction the government intends to take so they can make long-term investment decisions.”