Chery Auto Plans British Factory

China's Electric Drive: Chery Eyes UK Factory Amid Global Tariff Storm

Chery Auto, a major Chinese vehicle maker, is seriously evaluating the prospect of establishing a production facility in Great Britain. This facility would represent its second in Europe. The potential move comes as the company faces the strategic challenge of rising tariffs in both the United Kingdom and the European Union. Building a UK factory is viewed as a crucial part of the company’s "localisation" strategy, aimed at embedding its operations within key markets to mitigate trade barriers and enhance its regional footprint.

The consideration of a British factory signals a deepening commitment to Europe. This follows the company's successful launch of two new automotive lines, Jaecoo and Omoda. This strategy of localisation is becoming increasingly common among Chinese automakers. They seek to build vehicles inside European trade blocs to avoid the costly import duties that are reshaping the global automotive landscape. The decision highlights the shifting dynamics of international car manufacturing and trade.

A Strategic Move Towards Localisation

Victor Zhang, who directs UK operations for Chery, highlighted the potential for a British factory. His comments were made during the yearly gathering of the Society of Motor Manufacturers and Traders (SMMT). Zhang confirmed the firm's active consideration of the idea. He framed the potential investment as a core component of a broader "localisation" plan. This strategy aims to build cars closer to the customers who buy them.

Zhang explained that for a brand to truly commit to a market like the United Kingdom, local manufacturing is a step it should seriously undertake. He confirmed that the topic is open for discussion and that all possibilities are currently being explored. Chery is already engaged in conversations with relevant parties to assess the viability of such a project. This move would mirror actions taken by other international carmakers to navigate the complexities of post-Brexit trade rules.

Impressive UK Market Entry

Chery has created a notable impact since introducing its Jaecoo and Omoda automotive lines to the United Kingdom in September 2024. The company quickly established a network of 75 showrooms across the country. This rapid expansion has translated into significant sales figures. By the first quarter of 2025, the company had registered a combined 6,427 vehicles under its Jaecoo and Omoda lines, demonstrating strong initial momentum.

The sales performance indicates a growing curiosity and acceptance of Chinese car brands among British drivers. Victor Zhang noted that this interest is converting into tangible sales. The company's offerings include what Zhang described as a "super" hybrid vehicle, able to travel for a distance of ninety miles using power created during operation. This advanced technology appears to be resonating with a market increasingly focused on electrified transport options.

Image Credit - Xinda Tech

Growing Consumer Appetite

Encouraging consumer sentiment supports the success of Chery's initial foray into the marketplace in Britain. Victor Zhang has pointed to data suggesting a significant portion of the UK public is open to considering vehicles from Chinese manufacturers. He noted that around four out of ten shoppers have shown they are open to exploring these new brands. This receptiveness provides a strong foundation for Chery's ambitious growth plans in the country.

The market's positive reaction is further evidenced by strong sales of specific models. In May 2025 alone, the company registered 1,677 vehicles from its Jaecoo and Omoda lines that were equipped with their Super Hybrid System (SHS). This performance highlights the appeal of their plug-in hybrid technology, which combines electric driving with the flexibility of a petrol engine. Such figures underscore the brand's successful immersion into the competitive UK automotive scene.

A Rising Tide of Chinese Investment

Chery's potential factory fits within a much larger trend of Chinese investment flowing into the UK's automotive sector. These businesses are boosting their manufacturing and export initiatives in both the European Union and Great Britain. This strategic pivot is partly a reaction to the restrictive duties that the United States has put in place, which have made the American market more challenging to access.

Geely Auto, a different major Chinese producer, has already committed funds exceeding three billion pounds to Lotus, the celebrated UK sports car company. Additionally, EVE Energy, a Chinese company specializing in electric vehicle batteries, is in developed talks regarding an investment of over one billion pounds to build a huge new production site near Coventry. These significant financial commitments demonstrate a clear and growing confidence in the UK as a strategic hub for automotive innovation and production.

EVE Energy's Coventry Gigafactory

The potential investment by EVE Energy in a Coventry-based gigafactory represents a landmark project for the UK's electric vehicle ambitions. The Chinese battery company is reportedly negotiating a commitment of an initial £1.2 billion for the facility, which could create up to 6,000 jobs. The proposed factory would be situated at Coventry Airport, a site that already has planning permission for such a large-scale battery manufacturing plant.

This development is seen as crucial for cementing the West Midlands' role as the heart of the UK's battery and electrification cluster. The facility is planned to have an initial output of 20 gigawatt-hours, with the potential to scale up to 60GWh in subsequent phases. Such a capacity would make it a cornerstone of the UK's domestic battery supply chain, which is essential for meeting future automotive production needs.

Geely's Strategic Reintegration of Lotus

Geely's involvement with the British brand Lotus has also entered a new phase. In April 2025, Geely exercised a put option, initiating a process for Lotus Technology to acquire Geely's 51% stake in Lotus Advance Technologies, the UK manufacturing arm. This non-cash transaction is designed to reintegrate Lotus's research, development, and production businesses under a single unified brand structure.

The move aims to strengthen the Lotus brand equity and improve operational synergies. Geely first purchased a majority holding in the renowned UK sports vehicle company back in 2017. This latest structural change is integral to a long-term strategy to transform Lotus into a global leader in luxury electric mobility, combining its British heritage with advanced technology developed through its international network.

European Expansion to Bypass Tariffs

Chinese automakers are not limiting their investments to the UK. These companies are also setting up production plants inside the EU as a way to bypass the duties on electric vehicle shipments that Brussels enacted. This strategy of building cars inside the single market allows companies to sell their vehicles without incurring the steep import duties designed to protect European manufacturers. This approach is vital for competing effectively on price.

For example, BYD, a competing corporation from China, is erecting its initial assembly facility for Europe within Hungary. Concurrently, a joint venture has been secured by Chery's Omoda brand with the Spanish vehicle producer Ebro, for a plant situated south of Barcelona. These investments underscore a strategic pivot to localised production as the primary method for navigating the EU's trade defences and capturing market share.

Image Credit - Motor Trader

BYD's Major Investment in Hungary

BYD's commitment to the European market is substantial, with Hungary becoming its central hub. The corporation is erecting a full-scale car production facility in Szeged, which will be the first instance of a Chinese company assembling passenger vehicles in Europe. Production is slated to begin in late 2025. This move is critical for BYD's plan to increase its market presence across the continent, as cars produced within Hungary will be exempt from EU tariffs.

Beyond manufacturing, BYD also announced in May 2025 that it will establish its European headquarters and a new research and development centre in Budapest. This expansion belongs to a €248 million investment program expected to create thousands of jobs. The R&D centre will focus on developing models and technology specifically for the European market, demonstrating a deep commitment to localisation and long-term growth.

The Complex Web of Global Tariffs

The automotive industry is currently navigating a complex and volatile trade environment. A key factor driving Chinese investment in Europe is the group of restrictive duties put in place by America during the Trump administration. These duties made it more difficult for Chinese-made vehicles to compete in the US market, encouraging manufacturers to focus on growing their footprint within the EU and the UK instead.

Adding another layer of complexity, the European Union has moved to impose its own tariffs on Chinese-made electric vehicles. In June 2024, the EU announced plans for additional duties of up to 37.6 percent on some brands, citing unfair state subsidies in China. These tariffs have prompted Chinese firms to accelerate their plans for local European production to avoid the high import costs.

A Shifting UK-US Trade Landscape

The trade relationship between the United Kingdom and the United States has also undergone recent changes. Following a deal announced in May 2025, the US reduced its tariffs on UK-made cars. The rate was lowered from 27.5 percent to 10 percent for the first 100,000 vehicles exported annually. Any cars exported beyond that threshold will still face the higher tariff rate.

While this reduction offers some relief, the new 10 percent tariff is still significantly higher than the pre-Trump era rate of around 2.2 percent. Furthermore, a general 10 percent tariff on many other UK imports remains in place, and a punishing 25 percent tariff on British steel also remains. Jonathan Reynolds, the business secretary, has stated his active fight to have these remaining duties eliminated.

The UK's Stance on EV Tariffs

As the EU implements new tariffs against Chinese electric vehicles, the UK has so far adopted a different approach. Jonathan Reynolds, the new business secretary, has indicated Britain's lack of immediate plans to follow the EU's lead. He stated that while he does not rule anything out, any decision must be the right one for the UK's export-focused automotive industry.

This position has been reiterated on multiple occasions, with officials emphasising that the government remains vigilant but will only act if deemed appropriate for the domestic industry. The UK car sector has not formally requested an investigation by the Trade Remedies Authority, which would be a necessary precursor to imposing any new tariffs. This positions the United Kingdom as an open market, potentially encouraging more Chinese EV imports and investment.

A Balancing Act for Britain

The UK government faces a delicate balancing act. On one hand, it needs to attract foreign investment from companies like Chery and EVE Energy to secure the future of its automotive manufacturing base. Such projects are vital for creating jobs, developing new technologies, and transitioning to a zero-emission future. The head of the SMMT, Mike Hawes, has urged the industry to "think big" to win its share of global investment.

On the other hand, there is pressure to protect domestic manufacturers from a surge of lower-cost imports. The UK automotive industry already faces significant challenges, including the world's highest electricity costs for manufacturers and tough net-zero regulations. Striking the right balance between fostering open trade and ensuring a level playing field will be a critical task for policymakers in the coming years.

The Drive for Deeper China Engagement

Despite geopolitical tensions, there is a clear push for greater economic engagement between Britain and China. Sherard Cowper-Coles, who heads the China-Britain Business Council, informed the SMMT conference that investors from China are proactively searching for ventures in the United Kingdom, partly as a consequence of the trade policies put in place during the Trump administration. This interest creates a pragmatic imperative for collaboration.

Cowper-Coles, with a background in diplomacy, has consistently argued against "decoupling" and stressed the importance of a practical economic relationship. He highlighted the two-way flow of investment and ideas as essential for both nations. This sentiment is seemingly shared at a governmental level, with reports of high-level diplomatic visits being planned to further strengthen economic ties and prepare for future collaborations between the two countries.

High-Level Diplomatic Overtures

The strengthening of business ties is being reinforced by diplomatic efforts. Sherard Cowper-Coles noted that Jonathan Powell, who advises on national security for the UK, was anticipated to travel to China to set the stage for an upcoming visit from the prime minister. This indicates a strategic effort to maintain and enhance high-level communication channels between London and Beijing, fostering an environment conducive to investment and trade.

Furthermore, Jonathan Reynolds is also expected to be present for the September meeting of the joint economic and trade commission. These diplomatic manoeuvres suggest a coordinated strategy to ensure the UK remains an attractive destination for Chinese capital. Cowper-Coles praised the current UK government's approach to China engagement, noting that several cabinet ministers have already visited the country since taking office.

Navigating Economic Headwinds

The UK's automotive sector continues to face a challenging economic environment. Despite some growth in the new car market in May 2025, overall sales remain below pre-pandemic levels, with low consumer confidence being a persistent issue. The market's recent growth has been driven primarily by fleet and business sales, while private buyer demand has declined.

The SMMT has highlighted the strain on the industry, with manufacturers funding a £6.5 billion bill for electric vehicle incentives over the last 18 months to stimulate demand. These underlying economic pressures form the complex backdrop against which major investment decisions, such as Chery's potential factory, are being made. The sector's long-term health depends on both attracting new capital and reviving domestic demand.

Challenges on the Road Ahead

While the prospect of a new Chery factory is welcome news, the path to its realisation is not without obstacles. The company will need to secure a suitable location, negotiate potential government incentives, and navigate the UK's regulatory landscape. Any major investment from a Chinese firm is also likely to face political scrutiny and a national security review, adding another layer of complexity to the process.

Furthermore, the UK automotive market is highly competitive. New entrants must contend with established European, Japanese, and Korean brands that have deep roots and loyal customer bases. Success will depend not only on the quality and price of the vehicles but also on building a robust and trusted brand presence over the long term.

The Future of British Motoring

Great Britain's car manufacturing sector stands at a pivotal crossroads. The global shift towards electric vehicles, coupled with profound changes in international trade policy, is reshaping the sector at an unprecedented pace. Investment from dynamic new players in China, like Chery and EVE Energy, offers a significant opportunity to revitalise the UK's manufacturing capabilities and secure its place in the new automotive era.

However, this opportunity comes with complex challenges. The government must craft a coherent industrial strategy that can attract vital foreign capital while simultaneously supporting its domestic supply chain and protecting local jobs. The decisions made in the coming months regarding trade, investment, and regulation will undoubtedly determine the look and feel of the cars on Britain's roads for decades to come.