Established car manufacturers are being forced to discount heavily in the face of cheap competition from China, the head of the UK's industry lobby group has admitted.
Mike Hawes, the chief executive of the Society of Motor Manufacturers and Traders (SMMT), said in a briefing it was one reason behind a slump in UK production this year.
The body reported a drop of 7.5% over the first six months of 2026 compared to the same period last year, to 385,979 vehicles.
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Those made for export fell by 5.6% while output for the domestic market was down 13.2%.
High energy costs, trade uncertainty, regulation and lower investment were also cited as reasons for the declines.
"In terms of the volume, they're under extraordinary pressure because the Chinese can produce good vehicles at a cheaper cost," Mr Hawes said.
"There's a lot of discounting going on in the market...that's basically to try and compete with a Chinese brand."
Chinese-owned electric and plug-in hybrid models account for around 15% of UK new car sales currently, according to SMMT data.
The top-selling brands include SAIC Motor's MG, BYD and Chery's JAECOO and OMODA.
The trend is being witnessed across Europe and in other key markets.
Earlier this month, the boss of Germany's Volkswagen warned of the need for greater cost-cutting to help deal with the challenge posed by Chinese brands despite the European Union imposing tariffs on cars built in China in 2024.
Oliver Blume has proposed doubling earlier agreed job cuts to 100,000 and warned that four factories in Germany are at risk of closure.
The UK has not followed the European Union in imposing tariffs on Chinese-built cars.
That is because no UK-based manufacturer is understood to have raised a complaint - possibly because China is a key export market, particularly for the luxury sector.
The government moved in April to help UK manufacturers cut their energy costs through the British Industrial Competitiveness Scheme.
It has also softened its demands of the car industry through the Zero Emission Vehicle (ZEV) mandate regime that sets targets for electric vehicle sales.
Mr Hawes added: "Global vehicle production remains under intense pressure, and the UK is no exception...but decline is not inevitable.
"Urgent action on energy costs, reform of market regulation and improved trading arrangements with our global partners would ensure the sector can return to growth.
"And given that growth would be across every region in the UK, there is every reason for the new government to get behind the sector," he said.
(c) Sky News 2026: Prices cut and production drops as Chinese cars flood UK market
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