Electrive — 2026-09-28
Automotive Industry
The European Union is reportedly urging the UK to raise its tariffs on Chinese electric vehicles. According to a report by the Financial Times, citing sources familiar with the discussions, Brussels has signalled to London that closer alignment of British trade policy with the EU could be a prerequisite for UK companies to benefit from the planned ‘Made in Europe’ industrial policy under the EU’s Industrial Accelerator Act. The most far-reaching solution, it is said, would be for the UK to join the EU Customs Union. The European Commission declined to comment on the report to the FT.
The concern is that the UK’s lower trade barriers could make it a gateway for Chinese vehicles into the EU single market. Since the end of October 2024, the EU has imposed definitive additional tariffs of between 7.8 and 35.3 per cent on battery-electric passenger cars from China, depending on the manufacturer, in addition to the regular import duty of 10 per cent. This means the total burden on imports can reach up to 45.3 per cent — this applies, for example, to electric vehicles from the SAIC Group, which includes the MG Motor and Maxus brands. The UK has not adopted these additional anti-subsidy tariffs and currently puts the regular 10 per cent duty on Chinese vehicles .
Chinese cars hold 16 per cent market share in the UK
The issue is particularly relevant for the British automotive industry. Chinese manufacturers have significantly expanded their market share in the UK this year. According to data cited by the Financial Times, Chinese-made vehicles now collectively account for around 16 per cent of the UK new car market – although this figure likely includes all powertrain types. At the same time, London is courting Chinese investment in domestic production. For example, Nissan reached an agreement with Chery in June, under which the Chinese manufacturer is evaluating a production line at Nissan’s Sunderland plant.
The British automotive industry currently faces the challenge that its supply chains are closely intertwined with the EU. In March, the European Commission proposed its ‘Made in EU’ and CO₂ requirements for public procurement and state funding programmes as part of the planned Industrial Accelerator Act. These are expected to affect cars, steel, aluminium, and other net-zero technologies, among others. The UK wants its companies and supply chains to be treated similarly to those from the EU under these rules.
SMMT study highlights close economic interdependence
The UK automotive industry association, SMMT, has just published an analysis by Oxford Economics, finding that British car production supports €24 billion in economic activity, 250,000 jobs, and €1.6 billion in tax revenue in the EU annually. Excluding UK vehicles from EU funding and public procurement would therefore also impact the European automotive industry, the association argues. SMMT is calling for the UK to be recognised as a ‘trusted partner’ and for British vehicles to be treated as ‘assembled in the EU’ for the ‘Made in Europe’ rules.
SMMT Chief Executive Mike Hawes commented: “The EU is rightly focused on strengthening its industrial base. But restricting access for UK manufacturers in their largest market would be self-defeating – reducing substantial demand for EU-made components, goods and services, weakening competitiveness on both sides, and threatening growth at precisely the moment our industry must invest harder and faster in zero-emission mobility.”
The current conflict arises from the UK’s desire to secure access to European funding and sales markets while retaining the trade policy flexibility it gained after Brexit, particularly in its dealings with China. The UK government did not adopt the EU’s additional tariffs on Chinese electric vehicles in 2024. However, for steel, London has since aligned its trade policy more closely with the EU. Since July, significantly lower tariff-free quotas have applied to certain steel imports, with a 50 per cent tariff imposed beyond these quotas.
Tariffs present a difficult balancing act
UK Business and Trade Secretary Jonathan Reynolds has now explicitly stated that a change in tariffs on China is possible. In an interview with Politico at the Labour Party Conference, Reynolds said he is keeping the issue of tariffs on Chinese electric vehicles “under review, to be frank, more closely than lots of other issues” and that “different parts of our own sector want different things from” government policy.
Interests within the British automotive industry are divided: “We are an export-orientated sector. So clearly, you shouldn’t do anything that risks your export markets, and you always have to take heed of retaliatory action if you put tariffs in place,” Reynolds said, describing the UK’s position on Chinese electric vehicles as a “finely balanced” one.
UK seeks inclusion in ‘Made in Europe’ rules
Reynolds also emphasised that London continues to seek inclusion in the European ‘Buy European’ or ‘Made in Europe’ policy. Excluding the UK, the second-largest economy in Europe, would contradict the goal of building a more resilient European industry, the minister argued. Discussions between London and Brussels on the future inclusion of the UK in European industrial and supply chain rules are ongoing.
At the same time, a significant statement in support of the UK recently came from Germany. The premiers of the ‘automotive states’ of Baden-Württemberg, Bavaria, and Lower Saxony explicitly called for ‘Made with Europe’ rules in a joint position paper on the Industrial Accelerator Act. The German state leaders argue that these rules should not be limited to EU countries and should explicitly include the UK, as well as EEA and EFTA states (Iceland, Liechtenstein, Norway, and Switzerland), and other established partners. The three automotive states also advocate for a ‘moderate’ local content industrial policy and a consistent defence against unfair competitive distortions.
Conflict has been simmering for some time
The dispute over the UK’s inclusion in European industrial policy builds on an older conflict. Stricter rules of origin for electric vehicles in EU-UK trade are already planned for early 2027. These will require higher European content in battery cells and battery packs, among other things. The automotive associations ACEA and SMMT had already called for a further postponement in June, while the ACEA has meanwhile renewed its demand. In parallel, the EU and the UK are discussing the inclusion of British companies in the planned ‘Made in Europe’ rules.
So, while the German automotive industry explicitly wants to include the UK in a ‘Made with Europe’ scheme, Brussels is demanding in return a closer alignment of British trade policy with the EU — including on tariffs for Chinese electric vehicles.