The temptation to impose tariffs is understandable when faced with rapidly growing competition from China, writes Fraser Brown, managing director of MotorVise.
Chinese manufacturers have made remarkable progress in the UK car market. Brands unheard of a couple of years ago are now established names, while the Jaecoo 7 was the nation’s best-selling car in September and the second best-selling car year-to-date, with 39,474 registrations.
Such rapid growth inevitably raises questions about whether Chinese manufacturers enjoy an unfair advantage and whether Britain should follow the European Union by imposing additional tariffs on Chinese-made electric vehicles.
However, we must be careful because there’s a danger that any tariffs amount to a tax on competition and ultimately a tax on the consumer.
Affordability significant obstacle to adoption
The Government wants motorists to switch to electric vehicles, and its Zero Emission Vehicle mandate requires an increasing proportion of cars sold to be zero emission, with the target at 33 per cent this year.
Yet affordability is one of the biggest obstacles to widespread EV adoption. Chinese manufacturers are helping address this by bringing in competitively priced vehicles, often with technology and equipment associated with more expensive cars.
Indeed, the SMMT attributed September’s wider market growth largely to “intense competition – significantly from new entrants – increased choice and attractive deals”. It also pointed to greater model choice and compelling discounts as factors behind the record number of electric cars registered.
Manufacturers may absorb some of the cost of a substantial tariff, but inevitably part will translate into higher retail prices, less attractive finance offers or reduced incentives.
This seems counterproductive when we need EVs to become more affordable. SMMT figures for September illustrate the point. Almost 100,000 battery electric cars were registered during the month, an increase of more than a third year-on-year.
That’s encouraging, but battery electric cars accounted for 28.3% of September registrations and 26.2% year to date – still short of the headline 33% ZEV mandate target for 2026.
Making some of the most competitively priced EVs more expensive doesn’t appear an obvious way to close this gap.
Competition is good for the industry
There’s another consideration: competition is good for the automotive industry. Chinese brands have arrived with impressive vehicles, strong specifications, advanced technology and aggressive pricing, forcing every manufacturer to look harder at what it offers customers.
We’ve seen this before with Japanese manufacturers, once regarded as disruptive newcomers, followed by Korean brands. Both ultimately raised standards and became established parts of the UK automotive landscape.
The answer to greater competition shouldn’t automatically be to make the competition more expensive.
Britain needs a strong domestic industry
Of course, Britain needs a strong domestic automotive industry. It supports hundreds of thousands of jobs, and government should create the conditions that allow manufacturers here to invest and compete.
Instead, we should be asking how Britain can attract automotive investment, encourage battery production, reduce energy costs, improve charging infrastructure and persuade international manufacturers to build vehicles here.
Several Chinese automotive groups are expanding internationally and considering where to locate future manufacturing. Britain should be making the strongest possible case for that investment rather than sending a message that their products are unwelcome.
There’s also the risk of retaliation
There’s also the risk of retaliation, given that the automotive industry is one of the world’s most globalised manufacturing sectors – with supply chains crossing borders and British companies selling vehicles around the globe. Once countries begin erecting barriers, there’s no guarantee the consequences stop with those products originally targeted.
I understand the dilemma facing ministers, particularly given the UK’s relationship with the European automotive market. Britain can’t ignore decisions taken in Brussels or the potential consequences for UK manufacturers exporting into Europe.
But our trade policy should ultimately be based on what is right for the British automotive industry and consumers, rather than simply replicating measures introduced elsewhere.
The growth of Chinese brands tells us something important: motorists are buying these cars. They’re not doing so because of geopolitics, but because they believe the vehicles offer the design, technology, range, specification and value for money.
Blanket tariffs risk being blunt instrument
If there is demonstrable evidence of unfair trading practices, government should investigate and respond appropriately. But blanket tariffs risk being a very blunt instrument.
Britain can remain an open, competitive automotive market while attracting the next generation of vehicle manufacturing and technology investment. We need to think very carefully before giving that advantage away.
Author: Fraser Brown, managing director, MotorVise
Ensure you always receive AM insights. Make us a preferred source of news on Google