Cheap Chinese electric vehicles will dominate UK roads if European car makers retain focus on upmarket SUVs

Cheap Chinese cars are set to take over the car market as British and European makers continue to focus resources and output on premium SUVs, a new report has warned.

Chinese makers are already claiming a 10 per cent share of new car sales in the UK – and they are poised to dominate Britain’s roads in the coming years, the study said.

Dominance of Chinese brands will be driven by their higher concentration of small, affordable EVs, which European and British car makers are currently overlooking, according to the Global Fuel Economy Initiative (GFEI) and the FIA Foundation, the charity linked to motorsports’ biggest governing body.

In it report, it states: ‘China, which now accounts for 27 per cent of global passenger car sales, has secured a competitive edge in manufacturing smaller EVs, with strengths across key aspects of EV production, including battery supply chains, manufacturing efficiency, and software.’

The study went on: ‘It means China has evolved from a net importer of passenger cars before 2020 to the world’s largest net exporter.’

It said European manufacturers – including car makers in Britain – are set to lose ground on their domestic market by overlooking the affordable EV market.

Instead, UK makers are steering towards premium models, with Jaguar set to release a £100,000-plus EV in the coming months, shortly after its sister brand Land Rover brings to market its first all-electric Range Rover, due to cost around £150,000.

The report says the ‘shift in regional power balance’ in the automotive market – very much in China’s favour – is the result of changing market trends.

‘Electric vehicles sold in most markets outside China have predominantly targeted larger vehicle size segments,’ the study summarised.

‘This shift towards SUVs and adoption of EVs has resulted in increasing average vehicle purchase prices, which has contributed to stagnation in new vehicle sales in high-income markets and an aging of their vehicle fleets.’

The report says European and British manufacturer have reacted to this demand by prioritising larger models, which ‘offer automakers higher profit margins’ but have a ‘detrimental impact on vehicle affordability, negative impacts on road safety, and increase energy and material consumption, threatening environmental targets’.

It instead urged makers to pivot to smaller EVs like those produced by Chinese companies that will ‘serve as a strategic response to these challenges’. 

Steve Gooding, chief executive of the RAC Foundation, told The Telegraph that British drivers are already seeing the huge appeal of affordable, small electric models by snapping up those being sold by Chinese newcomer brands.

He highlighted the demise of the Ford Fiesta in 2023 – Britain’s all-time best-selling car – as creating a gap in the market for more ‘small, keenly priced EVs’.

Yet domestic car makers have pivoted to premium products, ‘given the higher profit margins they tend to earn on bigger vehicles,’ Gooding said.

It comes as Labour last month launched its new Electric Car Grant (ECG) aimed at increasing demand for more budget-friendly EVs.

The scheme offers taxpayer-funded discounts on some new electric models of up to £3,750 as part of an effort to kickstart sales. 

It is tailored towards the less expensive end of the market, available only to sub-£37,000 models, which rules out many of the premium electric cars built in the UK and Europe.

However, it also looks to penalise Chinese brands by including sustainability targets that will rule of many of the new brands arriving in Britain in recent months.

In order to be eligible for the scheme, manufacturers must meet a designated threshold for emissions produced during the battery’s manufacturing, the vehicle’s assembly, and the ‘carbon intensity’ of the electric grids in the countries where the car is made.

A two-tier approach will see the greenest-made EVs qualify for the full Band 1 grant of £3,750, while those unable to meet the Government’s highest standard will still get a discount of £1,500 at a Band 2 level.

However, many brands will be ruled out entirely. 

MPs have stated that China’s ongoing reliance on coal-powered energy would ultimately rule them out of the Government-supplied discounts. 

Knowing this, many Chinese makers have instead launched their own discount schemes to match the value of that provided by the ECG to remain competitive on price.

As it currently stands, only Nissan is set to deliver smaller UK-made electric cars in the short-term future that will be eligible for the grant, which is running until 2028-29 thanks to a £650million backing.

It’s new Leaf EV – set to start from around £30,000 and using batteries supplied by its neighbouring battery gigafactory – has just entered production and will be on sale later this year.

While other Nissan models not produced in Britain have already been confirmed as qualifying for the lower £1,500 Band 2 ECG, the Leaf is expected to be among those eligible for the full amount. 

Nissan is also due to unveil a next-generation Juke EV, which will be an even cheaper compact SUV powered by British-supplied batteries. This is also likely to qualify for the full £3,750 saving.

Some 22 EV models (at the time of publishing) have been confirmed as qualifying for a Band 2 £1,500 discount, including the Renault 5 and Volkswagen ID.3. 

EV experts have labelled the scheme an ‘expensive mess’, while retailers have said it has put the handbrake on electric car sales while customers wait to find out which models are eligible for discounts.

Even Mini could be set to miss out on the discounts.

Despite producing cars at its Cowley factory in Oxford for two decades, its parent group BMW has outsourced manufacturing of its all-electric Mini hatchback and Aceman crossover to China in a deal with Great Wall Motor (GWM).

Having previously committed to bringing production of electric Minis back to the Oxford plant in 2026, earlier this year BMW bosses announced they had put on hold plans to invest £600million into retooling the UK factory due to a slower than expected take-up of EVs.

They said they had paused its investment given ‘multiple uncertainties facing the automotive industry’.

Yet the Mini’s £26,905 starting price tag is £10,000 higher than that of rival-sized Chinese EVs, such as BYD’s £17k Dolphin Surf.

Leapmotor’s T-03, the smallest electric car on sale in Britain today, costs even less, currently starting from £14,495 after the Chinese brand reduced its pricing by £1,500 following the announcement of Labour’s ECG. 

Jack Cousens, head of roads policy at the AA, said ‘budget-friendly’ Chinese EVs have already secured East Asian brands a strong grip on the UK market – which they are destined to extend in the run-up to the end of the decade.

Some 19,000 of the 191,000 cars sold in the UK in the month of June were made by Chinese brands, including the likes of BYD, MG, GWM Ora, Jaecoo and Omoda.

And this success has seen Chinese brands extend their attention to larger family models to increase their stronghold on UK and European markets.

Cousens told the Daily Mail: ‘MG, now Chinese owned, offers both small and larger EVs. 

‘Jaecoo, Xpeng and Genesis are doing well in the larger market. 

‘Look out for the Jaecoo J5 which is on the cusp of being released and looks like a Range Rover Evoque, but at a fraction of the price.’

AA president Edmund King added: ‘There is no doubt that over the last twenty years the size of vehicles, whether petrol, diesel or electric, has grown in line with the popularity of SUV models where consumers seem to like the higher seating position and extra space.

‘However, well designed smaller EVs, such as the Renault 5 and Mini electric range, have proved popular.

‘There are now more than 130 EV models available in the UK, which are a mix of budget cars, family cars and SUVs. There are more than 33 new EVs with a price under £30,000, with more set to launch in the UK in the coming months and with Government grants applicable to this sector, we should see an increase in smaller less expensive EVs.’

The Department for Transport says the ECG aims to encourage uptake of small EVs.

A spokesman said: ‘We’re investing over £4billion to support both industry and consumers in making the switch to electric, giving drivers the confidence to choose the models that work best for them.

‘This includes providing discounts worth up to £3,750 off the cost of a new electric car and rolling out more public chargepoints with 83,000 now available and over 100,000 more on the way.’