British drivers are being warned that the price of new vehicles could skyrocket in the near future amid a potential trade war between the US, the European Union and China.
Both the United States have taken significant steps to crack down on the number of Chinese-made electric vehicles being imported by levying heavy tariffs on manufacturers operating in China.
The first escalation came in May when President Joe Biden announced that the tariff rate on Chinese electric vehicles under Section 301 of the Trade Act 1974 would increase from 25 per cent to 100 per cent.
He said this was necessary to protect the future of the American automotive industry in response to “China’s unfair trade practices”.
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Brands with high-power engines face paying higher tariffs
LAND ROVER
This was then recently followed by the European Union’s decision to increase tariffs impacting a number of major car brands which could be forced to hike prices in the near future.
It was confirmed that tariffs would impact manufacturers including BYD (17.4 per cent), Geely (20 per cent), SAIC (38.1 per cent), other EV brands which cooperated with the investigation (21 per cent) and all other brands that failed to help the EU (38.1 per cent).
However, China is now considering whether to include tariffs on manufacturers who produce their vehicles in the European Union, with Chinese brands calling for “the most severe measures”.
The new tariffs would deal with brands which produce high-powered engines, potentially impacting Jaguar Land Rover, which produces some models in Slovakia, as well as Italian brand Ferrari.
According to The Telegraph, Beijing could introduce tariffs of 25 per cent on imported European petrol cars that use engines of 2.5 litres and above.
ManMohan Sodhi, Professor of Operations and Supply Chain Management at Bayes Business School (formerly Cass), told GB News that the EU should be careful when looking to assign tariffs on China.
He said: “Given the fervour for protecting the nascent electric car industry in the US and the EU, the Chinese response is quite measured, potentially affecting only Europe-made luxury cars with large petrol engines.
“Their purpose is to get the European car manufacturers on board to lobby their governments not to follow the US blindly, given the greater dependence the EU manufacturers have with China and the presidential elections in the US, where economic rationality has currently taken the backseat.
“The EU and China have a larger common ground and the Chinese are nudging their EU counterparts with this move.”
There are fears that brands will need to hike their prices for UK, European and Chinese customers to deal with the expensive tariffs and continue to make profits.
Tesla has already announced that its vehicles across European markets would likely lead to more expensive costs for drivers, before urging them to invest in one of its popular EVs before July 1.
With new car registrations down across Europe, car manufacturers will have to make tough decisions if they plan to increase their prices in the face of higher tariffs.
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Chinese car brands BYD, Geely and SAIC will be forced to pay harsh tariffs across EuropeGETTYThis could have a dramatic impact on the uptake of electric vehicles in the coming years if they remain unaffordable for the majority of motorists.
Some experts have called for drivers to receive additional help through the use of targeted incentives, like the now-scrapped Plug-in Car Grant, or €4,000 (£3,382) grants in France.