Bad news for Tesla: Britain is going bonkers for Chinese cars

Tesla might be safe from Chinese EV competition in the US — but across the Atlantic in the UK, China's automakers are booming.

Sales of Chinese cars have surged this year in Britain, even as Tesla's sales have cratered, with the likes of BYD growing at enormous speed in the tariff-free market.

According to data from the Society of Motor Manufacturers and Traders, vehicles manufactured in China made up 9.4% of all UK sales in May, up from 7.7% in April, and up from 5.5% in May 2024.

The surge was driven by BYD. The Chinese EV giant recorded a 400% rise in sales from a year earlier, while Polestar, which is owned by Chinese conglomerate Geely, saw its sales spike by nearly 300%.

In contrast to its Chinese rivals, Tesla, which is battling a global sales slump amid protests and backlash against CEO Elon Musk's political interventions, saw its sales collapse 36% in the UK in May.

Unlike the US and Europe, the UK has not imposed tariffs on Chinese EVs, and JATO Dynamics analyst Felipe Munoz told Business Insider that the lack of import taxes made the UK a "free market" for Chinese carmakers.

In the US, Chinese electric cars were hit with a 100% tariff last year, while the European Union has imposed import taxes of up to 35% on specific manufacturers, with BYD facing a 17% tariff.

Munoz said the growing popularity of Chinese cars in the UK offers evidence that the likes of BYD can quickly take market share from Tesla and legacy automakers.

"It's sending a message to the legacy carmakers, Tesla and many others, that the Chinese can gain market share very easily, because their cars are very competitive compared to what you see in the legacy carmakers," said Munoz.

Munoz said Chinese-controlled firms like BYD and MG, a historic British brand now owned by Chinese company SAIC, had achieved success in the UK by offering a broad spectrum of new models, including both EVs and plug-in hybrids.

He added that BYD was introducing new, high-quality models at such competitive prices so quickly in the UK that it was outweighing the lack of brand awareness that usually limits the growth of carmakers when they enter a new market.

BYD's cheapest model in the UK, the Dolphin Surf hatchback, is expected to cost around £18,000 ($24,500) when it goes on sale this week, more than £20,000 ($27,000) less than the starting price of Tesla's Model 3.

While Tesla sales slumped, US automaker did manage to outsell Jaecoo and Omoda, two relatively unknown Chinese brands that beat Tesla in April, but lagged behind BYD and MG.

A warning sign for Tesla

Tesla's struggles in the UK are a dire warning for the company as it faces growing competition from Chinese carmakers around the globe.

The rapid rise of BYD and its rivals has sent shockwaves throughout the auto industry, with Chinese carmakers putting Western and Japanese carmakers in China under severe pressure with a wave of affordable, high-tech electric and hybrid cars.

Now, many of those Chinese automakers are eyeing global expansion, with BYD vowing to sell half of its cars overseas by 2030, according to a recent report from Reuters.

Musk himself warned last year that without trade barriers, Chinese carmakers would "demolish" their Western rivals — and what's happening in the UK seems to be proving him right.

Ultimately, Munoz said the growing popularity of Chinese cars in the UK offers evidence that, in a straight fight, the likes of BYD can quickly take market share from Tesla and legacy automakers.

The analyst said that while tariffs would slow BYD and its rivals down, it was unlikely to stop them entirely.

Munoz pointed to BYD's growing sales in Europe, where the brand has adapted its strategy to deal with the EU's 17% tariff by selling more hybrid cars, which are exempt from tariffs.

"With or without tariffs, these guys are coming. The tariffs are not going to stop them," he said.