9/10/2025 |Articles are machine translated
The Yangwang U9 super sports luxury electric car developed by the Chinese automaker BYD. | Photo: BYD
Politicians and the media in Europe have long claimed that cheap Chinese electric cars are flooding European markets, destroying the EU automotive industry. What is the reality? Is Chinese production conquering the old continent thanks to low prices? And is it conquering it at all?
Chinese EV manufacturers benefit from many advantages thanks to technological innovation, high production efficiency, strong supply chains, economies of scale, and significantly lower labor and energy costs. These advantages are reinforced by two decades of expansionary industrial policies by the Chinese government, including subsidies that increase demand for EVs and other types of vehicles with new powertrains in the domestic market, but most importantly, securing the necessary raw materials and components for their production, including battery production.
After the European Commission concluded that Chinese electric car manufacturers were receiving state subsidies to an extent that distorted fair competition, it imposed high tariffs on imports of these cars.
The tariffs forced Chinese carmakers to switch to a fallback plan, offering high-quality cars with combustion engines supplemented by various hybrid drive systems that are exempt from the tariffs. As sales statistics show, this plan is working very well. Despite Europeans’ belief in their technical superiority, Chinese carmakers are proving that they are now fully on top in the field of combustion engines and hybrid drives.
However, after the tariffs were imposed, statistics show no decline in the export of electric cars to the EU. Chinese cars continue to gain popularity and increase their market share at the expense of established European and Japanese brands.
JATO Dynamics data shows that the number of registrations of all new passenger cars in Europe (including the UK) fell by 0.3 percent year-on-year in the first half of 2025. However, sales of cars from Chinese brands increased by 91 percent in the first half of 2025 compared to last year, and their market share reached a new record of 5.1 percent, with another 2.9 percent being taken by European brands owned by Chinese companies.
Contrary to popular belief, Chinese brands are not making a name for themselves in Europe with cheap cars. Instead of undercutting prices, Chinese electric car manufacturers have adapted to the European market and are betting on a strategy of prioritizing high profit margins over volume.
Comparable electric car models are more expensive in the EU than in China. Even small ones are sold in Europe at significantly higher prices that do not correspond to the necessary technical adjustments under European legislation. For example, BYD reduced the base price of its cheapest model, the Seagull, to 55,800 yuan on the Chinese market in the spring, which is equivalent to 170,000 crowns. It is equipped with the Gods Eye semi-autonomous driving system. In Europe, its equivalent Dolphin Surf is cheapest in Italy, where the basic version costs 18,990 euros with 22% VAT, which, in Czech terms with 21% VAT, is 470,000 crowns.
Instead of trying to compete on price, Chinese brands are presenting themselves as high-quality, technically sophisticated alternatives that outperform Western competitors with cutting-edge technology. In an effort to overcome prejudices about lower quality, Chinese electric car manufacturers are launching their premium models in Europe equipped with advanced features that are not found in comparably priced European cars.
For European consumers, cars are not just a means of transportation – they are a symbol of their identity and lifestyle. This means that gaining the trust of customers as a newcomer is difficult. However, the example of Tesla shows that many buyers are easily excited by technological pioneers. Surveys show that younger buyers are open to buying Chinese electric cars precisely because of their technological equipment.
Chinese brands have quickly gained market share in Norway, the country most promising for electric cars. “Norway is Europe’s laboratory for electric cars. It’s easier for unknown brands to get started there than anywhere else in Europe, and it doesn’t require as much investment as in the biggest European markets. Norway also doesn’t have its own automotive industry, which means it’s easier for an outsider to gain a strong foothold,” said Felipe Muñoz, global analyst at analytics firm JATO Dynamics.
Chinese brands in Norway gained a market share of 10.04 percent between January and June 2025, by far the largest of any European country, according to JATO Dynamics. Meanwhile, electric cars reached a market share of 94 percent in the first half of 2025, according to the Norwegian Electric Vehicle Association NEVA. However, there are no import duties on Chinese electric cars in Norway.
Entering the market for a new brand is not easy. It is a long-term process that requires significant investment in marketing, brand awareness and building a sales network. Creating an after-sales service system is key. After-sales service is crucial for gaining consumer trust in the European market. If the service fails to keep up with customer expectations, the brand’s reputation will suffer significantly. Moreover, any misstep can lead to complete failure. All this is exacerbated by the fact that two-thirds of new passenger cars in Europe are purchased by corporate customers, and in the case of electric cars, this proportion is even higher. For corporate customers, quality after-sales service, together with the availability of financing, is crucial.
Many Chinese car manufacturers are therefore trying to achieve a quick breakthrough when entering the European market by partnering with large local sales organizations in the hope of using their sales network to penetrate the market. But they often find that things don’t go as planned. Their European dealers are often reluctant to accept new brands that lack consumer trust. If a new brand struggles with quality or after-sales service, it can damage a reputation built over decades.
The complexity of cross-border distribution of spare parts dramatically increases the difficulty and cost of inventory management. In order to shorten delivery times, car manufacturers need to maintain inventory in multiple countries, which increases logistics complexity and operating costs. This is why we have repeatedly seen partnerships between Chinese manufacturers and distributors, which were concluded with great fanfare, end after a short time.
On the other hand, the attitude of European car manufacturers, their unwillingness to supply dealers with the cars that customers demand, and the uncertainty about the long-term future of some brands, are driving many sales organizations directly into the arms of Chinese carmakers promising quick profits.
Several Chinese manufacturers are pursuing a dual strategy: maintaining exports while localizing production to avoid tariffs. The construction of new factories in the EU, such as BYD in Hungary, Chery in Spain and Polestar in Slovakia, is part of a broader effort by Chinese companies to establish a permanent presence in the region. European governments, under pressure from left-wing and center-right parties, are seeking to create new jobs and are therefore supporting the construction of Chinese factories with subsidies and tax breaks.
Chinese automakers are turning primarily to Italy and Spain, where German and French cars do not have such a strong position, but these are attractive markets. However, Hungary has become the main base for Chinese investment in batteries and electric cars in Europe. It hosts large projects from BYD, CATL, EVE Power and Sunwoda – again supported by extensive subsidies.
The BYD Seagull city car is sold in Europe under the name BYD Dolphin Surf. The picture shows a fleet of cars in Rome. | Photo: Vladimír Rybecký
While this increases the EU’s overall production capacity, especially for the most important part of electric cars – batteries – it also raises concerns about strategic dependence on China. An example of how foreign investment can be misused politically is the recent case of Chinese electric car manufacturer Leapmotor, working with Stellantis. The latter moved planned production from Poland to Spain after Warsaw supported EU tariffs on Chinese electric cars. Too much concentration of investment in one EU member state can also lead to industrial imbalances.
EU tariffs on Chinese cars
From October 2024, EU anti-subsidy duties on imports of battery electric cars made in China will apply. These are applied on top of the normal 10% tariff on cars. The tariff regime is set to apply for five years, at least until October 2029, unless the EU decides otherwise. For vehicles with combustion engines, the EU’s general import duty remains at 10%. The same duty, 10%, also applies to plug-in hybrids and hybrids without external charging. However, increased duties apply to electric cars with a range extender. The EU and China are discussing the possibility of replacing the high tariffs on electric cars with agreements on minimum prices, the aim of which would be to stabilise competition. No agreement has been reached yet.
But building a factory is just the beginning. Many Chinese automakers, after launching their capacities in Europe, find that the production efficiency of China cannot be achieved here because the costs are significantly higher. The flexible manufacturing and integrated supply chain strategies that work in China cannot be replicated in the European context. The European supply system is complex, has longer delivery times, and Chinese companies do not have the necessary experience with it. After all, BYD has already postponed the start of series production of its electric cars at the Szeged plant until 2026, because due to lower costs, it preferred production at a plant being built in parallel in Turkey, from where imports to the EU are not burdened with tariffs.
In addition, the European Commission has launched an investigation into foreign subsidies for the BYD plant being built in Hungary, which signals that it is not limited to competitive advantages associated with imports.
European carmakers are facing an urgent task of streamlining their production. That is why they are getting rid of everything that does not bring sufficient profit. This may also be triggered by the sale of some “historical” brands. Since Chinese companies are aware that their own brands have limited chances of success in the conservative European market, they may try to acquire traditional names that customers know and trust.
That this works is shown by the example of MG – a traditional English brand successfully helps sell cars of the Chinese group SAIC. The situation is similar with Volvo, Lotus and the manufacturer of London taxis LEVC, brands owned by Geely. However, they have a development base and part of the production in Europe.
The influence of Chinese automakers in Europe is also evident in Renault’s partnership with Geely in the Horse division, focused on the development and production of cars with combustion engines in various forms of hybridization, the inclusion of Leapmotor cars in the Stellantis group’s offer, or the use of Xpeng software by the VW group.
And let’s not forget that the most important shareholders of Mercedes-Benz AG are the Chinese automaker BAIC Group with 9.98 percent and Tenacious3 Prospect Investment with 9.7 percent of the shares. The owner of the latter company is billionaire Li Shufu, who also owns the Geely holding. It is not so surprising then that Mercedes-Benz cars feature hybrid drives manufactured in China by AuraBay, which is part of the Geely holding.
