China’s retaliatory tariffs on European electric vehicles have exposed the vulnerability of UK automotive supply chains, analysts warned on Tuesday. The move, which followed a decision by the European Commission to impose provisional duties of up to 38 per cent on Chinese-made EVs, has disrupted plans by manufacturers including Ferrari to expand in the world’s largest auto market.
Beijing’s measures, announced on Monday, target imports of large-engine vehicles – a category that includes luxury SUVs and sports cars made by European brands. For Ferrari, which derives 12 per cent of its global sales from China, the tariffs threaten to derail its ambition to boost deliveries to the country by 15 per cent this year. The Italian manufacturer had already faced delays in obtaining regulatory approval for its first full-electric model, the SF90 Stradale hybrid.
The escalating dispute underscores the growing geopolitical friction over green technology. The EU’s probe into Chinese state subsidies for EV makers, launched in September, mirrors US actions under the Inflation Reduction Act. Both blocs are seeking to protect domestic industries from what they view as unfairly cheap competition.
UK carmakers, which rely heavily on battery imports from China, are caught in the crossfire. The Society of Motor Manufacturers and Traders (SMMT) urged the government to accelerate investment in domestic battery production. “This is a strategic vulnerability,” said SMMT chief executive Mike Hawes. “Without a secure supply chain for batteries and critical minerals, the UK’s ability to compete in the electric vehicle race is severely constrained.”
Currently, only one large-scale battery factory is operational in Britain, run by Envision AESC in Sunderland. Two others, owned by Tata and Nissan, are under construction. The SMMT estimates that the UK needs at least five giga-factories by 2030 to meet demand from automakers like Jaguar Land Rover, which plans to sell only electric cars from 2025.
The tariffs have also complicated negotiations over the UK-EU trade deal. Under the post-Brexit agreement, carmakers must source 45 per cent of an EV’s value from the UK or EU to avoid tariffs of 10 per cent. The threshold is set to rise to 55 per cent in 2024, a target many fear they will miss. “These rules of origin were designed to incentivise regional supply chains,” said Emily Taylor, a trade lawyer at Linklaters. “But the reality is that battery manufacturing capacity is not where it needs to be.”
For Ferrari, the immediate priority is managing its Chinese customers. The company declined to comment on the tariffs but has privately warned dealers of potential price increases. Analysts at Bernstein said the impact would be “modest” given Ferrari’s high margins and loyal client base. “The bigger concern is the signal this sends about the investment climate,” said Bernstein analyst Toni Sacconaghi. “If China is willing to weaponise its market, that will give pause to any foreign manufacturer planning long-term investments.”
The UK government has signalled it will push for a negotiated settlement in the EU-China dispute. But with elections due next year, it faces pressure to adopt a more protectionist stance. “The temptation is to follow the US and EU in subsidising domestic production,” said Taylor. “But that could backfire if it leads to a subsidy war that neither side can win.”
