The European Union has joined the United States and Canada in slapping tariffs on Chinese Electric Vehicles (EVs). It’s a rare moment of transatlantic unity – but where does it leave Britain? For now, the UK remains the awkward man in the room. It is the only G7 country not to have imposed tariffs on Chinese EVs (or, in the case of Japan, which already has arduous non-tariff barriers to deter foreign automotive companies from entering its markets.)
The European Commission has made it plain that they see Chinese EVs as an economic threat
Many will rightly question the silence from Whitehall. The UK’s omission from a coordinated attempt to stem China’s excess manufacturing capacity and stop cheap Chinese EVs flooding Western markets will only make our country a greater target.
Britain’s misguided approach appears to be driven in part by a desire to prioritise economic growth, ambitious net-zero targets, and optimistic outcomes of two planned bilateral trips to Beijing for the Foreign Secretary and Chancellor over the next few months. But Beijing will ensure that Britain pays the price for this approach.
The UK looks an increasingly easy and attractive country to gain market share for Chinese manufacturers, not least because of the previous government’s ambitious Zero-Vehicle Mandate and its requirements for domestic producers to ensure 22 per cent of sales this year are EVs. A failure to do so risks penalties for producers of £15,000 per car, unless producers buy green credits from the few EV producers who meet the mandate (many of whom are Chinese).
Both Ford and Stellantis have already decried the scheme as unworkable and the industry is actively lobbying the government to review its targets at the Budget this month. Meanwhile, Chinese EV producers are fast gaining EV market share in the UK; the Society of Motor Manufacturers and Traders reported that their market share grew from 2 per cent in 2019 to 33.4 per cent in the first half of 2023.
At the same time, little thought appears to have been given by the government to the ever-present data-security risks Chinese EVs present. Some estimates put each EV as producing up to 32 terabytes of data per day, which is the equivalent of the storage of the data storage of 128 iPhones. Is this data safe? There are certainly question marks over what happens to that information, and whether China’s EV manufacturers can keep it out of the hands of the government in Beijing.
Aware of such risks, the Biden Administration in the United States introduced an Executive Order last month that would ban EVs and connected vehicles that use Chinese software or hardware from being imported or sold in the US. This ban could theoretically include US military bases in the UK, and may well lead to more transatlantic pressure on the UK government to introduce a crackdown.
Of course, the US is not alone in its hardline approach. The European Commission has made it plain that they see Chinese EVs as an economic threat comparable to Chinese solar panels flooding Europe’s markets a decade ago. This influx, of course, helped lead to the demise of the European solar industry. This is a fate which the Commission is keen to save the European automotive sector from. But Britain seems to be taking a more passive approach to this threat.
There is another problem for a UK government seeking a ‘reset’ with European institutions. The UK automotive sector continues to have tariff-free access to the European Single Market for EV exports. Could its stance on Chinese EVs put this access in danger? For the 160,000 automotive jobs in the UK, it cannot be overstated how much tariff-free access to the European Single Market matters as it transitions to EVs. The European Union is the largest foreign customer for UK automotives, accounting for at least 60 per cent of UK automotive exports.
Yet a divergence between the UK and the EU when it comes to measures to protect their respective automotive sectors from Chinese EVs, could lead to tariff-free access for UK EVs being revoked. Even open speculation, or the threat from Brussels that it might pull the plug on this arrangement, would depress investment into the UK automotive sector and encourage foreign-owned brands to consider moving their operations elsewhere.
It makes it all the more baffling then that the government sits on its hands and fails to join with its closest partners in Europe and the G7 in protecting domestic industry by increasing tariffs on Chinese EVs.
Much has been made of the government’s desire for a ‘China reset’. But the ‘reset’ with our closest neighbours at home may well depend on joining forces against Chinese EVs. The alternative, will be a rupture it can ill-afford.
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