Chinese EVs face only a 10% standard import duty in Britain, one of the largest major overseas markets without additional China-specific tariffs. Japan and Norway also lack them.

It's in contrast to the U.S., where a 100% tariff effectively shut Chinese EVs out. The European Union, the U.K.'s biggest trading partner, has manufacturer-specific duties on Chinese EVs of up to 35.3%, in addition to a standard 10% import duty on all foreign cars.

Now, the U.K. faces a difficult choice, as EU proposals may force it to impose tariffs to match the bloc's.

At the weekend, The Sunday Times reported that U.K. Business Minister Jonathan Reynolds is considering matching the EU's levy on Chinese EVs to avoid the pain of so-called "Made in Europe" proposals, which could hurt domestic companies selling into the EU.

A U.K. government spokesperson reiterated to CNBC that it had not imposed tariffs on Chinese EVs but added: "We continue to engage closely with industry so that our approach reflects the sector's and UK's national interests."

The Made in Europe legislation, part of the EU's Industrial Accelerator Act, is designed to protect the bloc's industries from unfair international competition by prioritizing European-made goods.

Read more

An EU official told the Financial Times in September that London would need to raise tariffs on Chinese EVs and align more closely with EU trade policy to avoid "Made in Europe" barriers.

The decision is finely balanced, given Prime Minister Andy Burnham's desire to reset relations with the EU, which the U.K. formally left in 2020, and the likelihood of China responding with retaliatory measures.

A spokesperson for the Chinese Embassy in London said it had expressed "serious concern" to Britain about the reports about potential tariffs.

"China is firmly opposed to any discriminatory practice involving tariff hikes or restrictive measures on Chinese products," a spokesperson said Tuesday. "We will continue to follow developments and respond accordingly," they said.

Chinese automakers rapidly made inroads in the U.K.

Chinese car brands have swiftly captured market share in the U.K.

Analysis by JATO Dynamics found that registrations of Chinese automakers, or original equipment manufacturers (OEMs), across both battery-electric and hybrid powertrains, rose to 519,424 between the start of January and the end of August, lifting their total market share to 28.1%. That's up sharply from 12.9% in the same period in 2025.

Hybrids accounted for the larger increase, adding 62,655 registrations versus 32,565 for battery-electric vehicles.

"That matters for policy," Paul Hilton, head of retail at JATO Dynamics, told CNBC by email.

"Tariffs aimed only at Chinese-built battery EVs could slow one part of the expansion, but would not address hybrid growth, vehicles made outside China or the underlying advantages in cost, product cadence and supply chains," Hilton said.

"A durable UK response should pair any evidence-based trade remedy with incentives for local production, competitive energy and battery costs, charging infrastructure, skills and alignment with European market-access rules."

'Temu Range Rover' takeover

The bestselling car in the U.K. last month was not a Tesla or a Ford — but the Jaecoo 7 from China.

The mid-size SUV, nicknamed the “Temu Range Rover,” starts at about £29,000 ($38,350) in the U.K., compared with roughly £45,500 for a Land Rover Discovery Sport.

The Jaecoo 7's nationwide sales climbed to 10,814 in September, according to the Society of Motor Manufacturers and Traders, outpacing the Tesla Model 3, Ford Puma and Kia Sportage.

Rico Luman, senior sector economist for transport and logistics at ING, said the growing policy gap between Britain and the EU is leaving the U.K. with limited options, besides tariffs, if it wants to maintain a level playing field with the bloc.

Speaking to CNBC by email, Luman said exclusion from the Made in Europe initiative could have “significant consequences” for existing businesses, making closer alignment with EU trade policy increasingly difficult to avoid.

"It's generally quite remarkable that batteries from China are exempted from EU tariffs," Luman said.

"At the same time this is logical as production in Europe isn't up to speed and Europe lacks the rare earth minerals and refinery capacity behind it," he added.