Britain's car industry is wrestling with a "difficult trade-off" between China and Europe, as manufacturers try to balance the advantages of both markets while facing looming trade measures that could squeeze UK exports to the EU.

The UK remains an outlier in refusing to impose import taxes on Chinese vehicles, even as the United States has effectively barred them and the EU charges duties of up to 45%. EU officials reportedly told Andy Burnham last month that Britain must introduce tariffs on inexpensive Chinese cars, or else Brussels would bring in protectionist "made in Europe" restrictions on British exports, damaging carmakers in their biggest market.

Ministers have resisted the pressure so far. Business secretary Jonathan Reynolds has argued that tariffs would "probably be reciprocated," hurting UK manufacturers' sales in China. Levies would also push up prices for British drivers who have embraced cheaper Chinese models, and could discourage brands like Chery, currently in talks to build cars at Nissan's Sunderland plant, from investing further in Britain.

Emily Sawicz of RSM UK said the industry "cannot afford to drift between the two indefinitely," noting Chinese investment could be a "lifeline" for carmakers while European market access remains "crucial" for smaller manufacturers. She warned that UK suppliers risk being "increasingly shut out" of European opportunities and said companies need clarity from government to make long-term investment decisions.

Autotrader's Ian Plummer said competition from Chinese brands has made cars more affordable and is "encouraging more people to go and buy a new car." Brands including BYD, Omoda and Jaecoo more than tripled their UK market share in the first eight months of 2026, reaching 12% of sales.

Figures released Friday showed British new car registrations rose 12% in the year to September, the strongest annual growth since 2017, driven by demand for electric vehicles and Chinese brands, with the Jaecoo 7 and BYD Sealion 7 among top sellers.

The SMMT warned this week that the EU's made-in-Europe rules, which limit subsidies, tax breaks and procurement contracts to vehicles built within the bloc, pose an existential threat to UK production. The EU accounted for 58% of UK car exports in the first half of the year, against roughly 4% for China. SMMT chief executive Mike Hawes said the two industries are "deeply integrated," so excluding British-made vehicles from Europe "would assure mutual damage."

Nissan's European chair, Massimiliano Messina, said last month Europe cannot allow the UK to become a "Trojan horse" for Chinese imports flooding the market. Chery's deputy UK chief, Victor Zhang, rejected this, saying most of what the company sells are super-hybrids rather than the vehicles targeted by tariffs, insisting "the cars we sell here stay here" and that investment would continue regardless.

Former Vauxhall chair Tim Tozer called tariffs "vital" to prevent the industry from "atrophying," describing Reynolds as "whistling in the wind" over hopes of sustaining exports to an increasingly nationalistic Chinese market.

Source: The Guardian

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