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 suppress the number of imported electric vehicles made in China by imposing heavy tariffs on manufacturers operating in China.
The first escalation came in May when President Joe Biden announced that the tariff on Chinese electric vehicles under Section 301 of the Trade Act of 1974 would increase from 25 percent to 100 percent.
He said it was necessary to protect the future of the US auto industry in response to China’s “unfair trade practices”.
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Brands with high performance engines face higher tariffs
LAND ROVER
This has recently been followed by the European Union’s decision to increase tariffs, impacting a number of major car brands, which could be forced to raise prices in the near future.
The tariffs were confirmed to affect manufacturers including BYD (17.4 percent), Geely (20 percent), SAIC (38.1 percent), other electric vehicle brands that cooperated in the investigation (21 percent) and all other brands , which failed to help the EU (38.1 percent).
But China is now considering whether to include tariffs on manufacturers that make their vehicles in the European Union, with Chinese brands calling for the “strictest measures”.
The new tariffs would apply to brands that produce high-performance engines, which could affect Jaguar Land Rover, which produces some models in Slovakia, as well as the Italian brand Ferrari.
According to The Telegraph, Beijing could impose tariffs of 25 percent on imported European gasoline cars with engines of 2.5 liters 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 cautious about imposing tariffs on China.
He said: “Given the fervor to protect the nascent electric car industry in the US and EU, China’s response is relatively measured and will potentially only affect European-made luxury cars with large petrol engines.
“Their purpose is to get European carmakers to lobby their governments not to blindly follow the US, given the increased dependence of EU manufacturers on China and the US presidential election, where economic rationality is currently on the back burner.
“The EU and China have more common ground and the Chinese are nudging their EU counterparts with this move.”
There are fears that brands will have to raise prices for UK, European and Chinese customers to cope with expensive tariffs and continue to make profits.
Tesla has already announced that its vehicles in European markets are likely to lead to higher costs for drivers, before urging them to invest in one of its popular electric cars by July 1.
With new car registrations falling across Europe, carmakers will have to make tough decisions if they plan to raise their prices in the face of higher tariffs.
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Chinese car brands BYD, Geely and SAIC will be forced to pay stiff tariffs across EuropeGETTYThis could have a dramatic impact on the uptake of electric vehicles in the coming years if they remain out of reach for most motorists.
Some experts have called for drivers to get more help through targeted incentives, such as the now scrapped plug-in car grant or €4,000 (£3,382) grants in France.