Europe’s “Walls” Keep Rising, but China’s Cars Keep Selling More

In June 2026, according to relevant authoritative sources, the European Commission is planning to impose anti-subsidy tariffs on plug-in hybrid vehicles from China. It is reported that the preparation work has been completed, and implementation can proceed once it receives approval from a majority of EU member states.

Although barriers in Europe will continue to rise, Chinese automakers’ sales and market share in Europe are still growing against the trend.

According to data from Gasgoo Auto Research Institute, in the first quarter of 2026, China’s automobile exports to the European market reached 438,400 units, up 84.7% year on year. In terms of pure electric vehicles, exports reached 198,300 units, up 94.6% year on year. For plug-in hybrid models, exports totaled 106,000 units, up 152.4% year on year. In addition, according to relevant data, Chinese brands’ market share in Europe climbed to 9.8% in April 2026, setting a new record high, while their share of the pure electric vehicle market exceeded 15% for the first time.

These seemingly contradictory phenomena precisely form the key entry point for understanding the current automotive competition between China and Europe.

The EU is erecting trade barriers.

In October 2024, the European Union officially imposed anti-subsidy duties on imported Chinese electric vehicles for a period of five years. In addition to the EU’s uniform 10% import tariff, differentiated anti-subsidy duty rates are applied to different companies: 17.0% for BYD, 18.8% for Geely, 35.3% for SAIC Motor, and 20.7% for other companies that cooperated with the investigation, such as NIO and XPeng. As a result, the combined tariff rate on some models could be as high as 45.3%.

Since then, China and the EU have continued their consultations. In April 2025, senior China-EU talks agreed to immediately launch negotiations on a price undertaking for electric vehicles, exploring the replacement of tariffs with a minimum import price mechanism.

On January 12, 2026, China and Europe reached a framework consensus on price commitments, and the European side simultaneously issued the “Guidance Document on Submitting Price Commitment Applications.” Qualified Chinese battery electric vehicle exporters may use this mechanism as an alternative to countervailing duties. This consensus is widely regarded by the industry as a key breakthrough in resolving the trade dispute over electric vehicles between China and Europe.

However, as of June 2026, the price commitment negotiations were still ongoing and had not yet been fully implemented.

Image source: Chery Automobile

Previously, the EU’s anti-subsidy tariff measures mainly targeted pure electric vehicles, with plug-in hybrid vehicles not included. In response, Chinese automakers quickly adjusted their export strategies and accelerated the overseas launch of related models.

Authoritative industry data further confirms this shift among Chinese automakers. According to data from Gasgoo Research Institute, in the first quarter of 2026, China’s exports of plug-in hybrid vehicles to Europe reached 106,000 units, up 152.4% year on year, while exports of pure electric vehicles totaled 198,300 units, up 94.6% year on year. Plug-in hybrid vehicles are growing significantly faster than pure electric vehicles.

According to authoritative data statistics, by April 2026, the market share of plug-in hybrid vehicles from China in the European market has approached 29%, while the market share of pure electric vehicles during the same period is 15.2%. The penetration rate of plug-in hybrids is clearly faster than that of pure electric vehicles. This data clearly indicates that after the European Union imposed countervailing tariffs on pure electric vehicles, Chinese car manufacturers have shifted their export focus towards plug-in hybrid models.

The European Commission’s plan to extend countervailing duties to plug-in hybrid models is precisely a “patch-up” measure in response to this market shift. Relevant sources said that, given that plug-in hybrid models in China also receive policy support similar to that of pure electric vehicles, their growing exports to Europe are “seen as posing a potential threat to the local automotive industry.”

Beyond tariffs, the EU is further constructing higher-level institutional barriers.

On March 4, 2026, the European Commission officially unveiled its proposal for the Industrial Accelerator Act (IAA). The act indicates that the EU’s industrial governance logic is rapidly shifting from traditional “defensive trade remedies” toward a model of “conditional market access.” In response, analysts at Gasgoo Auto Research Institute noted that since the EU imposed additional anti-subsidy duties on Chinese battery electric vehicles at the end of 2024, the profitability and viability of the complete built-up (CBU) vehicle export model have been facing unprecedented red-line pressure.

According to the IAA Act, the EU plans to subject projects with an investment value exceeding €100 million from countries whose manufacturing capacity accounts for more than 40% of global output in key industries to strict review. The review criteria set six compliance requirements, of which enterprises must satisfy at least four before approval may be granted: foreign ownership shall not exceed 49%; investment shall be made in the form of a joint venture; intellectual property rights shall be licensed to EU entities and proprietary technologies transferred; R&D funding invested within the EU shall be no less than 1% of the company’s annual turnover; the proportion of local employees shall be no less than 50%; and the proportion of local component sourcing shall be no less than 30%. Among these, the requirement that 50% of employees be EU workers is designated as a mandatory threshold and is not subject to the “four out of six” rule; it must be complied with without exception.

In the field of public procurement, the legislation explicitly requires that electric vehicles participating in EU public procurement must be assembled within the EU, and the local content of non-battery components should be no less than 70%.

Although the bill does not explicitly name any specific country, in each of the four designated “emerging strategic industries” — batteries, electric vehicles, photovoltaics, and critical raw materials — Chinese companies account for more than the 40% threshold of global production capacity that would trigger its provisions. China’s new energy vehicle production capacity exceeds 70% of the global total, while its battery capacity is about 80%. Multiple legal and industry analysts have pointed out that the bill’s actual impact will be concentrated primarily on Chinese investors.

The IAA still needs to be approved by the European Parliament and the Council of the European Union before it can take effect. On May 28, EU industry ministers held their first policy debate; however, the European Council meeting on June 18–19 still did not reach a final vote, and discussions are continuing.

From product tariffs to investment access, from local content requirements to technology transfer, the EU is building a comprehensive, multi-layered protection system.

The European wall is high, but it can't stop Chinese cars.

Against the backdrop of rising tariffs and growing institutional barriers, Chinese brands continue to see sustained sales growth in the European market.

According to data from Gasgoo Research Institute, in the first quarter of 2026, China exported 438,400 vehicles to Europe, up 84.7% year on year; for the full year of 2025, export volume reached 1.2118 million vehicles, representing an increase of more than one-third from 898,400 vehicles in 2024.

Additionally, other relevant authoritative data also outlines a clear trajectory from the perspective of market share: the market share of Chinese brands in the EU soared from 0.5% in 2021 to nearly 10% by the spring of 2026. In April 2026, this figure further climbed to 9.8%, breaking the historical record of 9.5% set in December 2025.

Some institutions forecast that the figure is expected to officially surpass 10% for the full year of 2026. In Europe’s battery electric vehicle market, Chinese brands reached a 15.2% market share in April, a record high; in the plug-in hybrid market, this figure came close to 29%.

At the individual automaker level, each brand maintained a growth trend.

Image source: Chery Automobile

According to data from the GaiShi Automotive Research Institute, Chery Automobile continues to hold the top position among Chinese brands in terms of export volume to Europe, with exports nearing 110,000 units in the first quarter of 2026, a year-on-year increase of 228.4%. SAIC Motor follows closely behind, with an export volume of 96,300 units in the first quarter, a year-on-year increase of 36.2%. In third place is BYD, with an export volume of 67,900 units in the first quarter. Leap Motor, relying on its deep cooperation with Stellantis, achieved an export volume of 25,100 units in the first quarter, marking a staggering year-on-year increase of 400%.

According to data from the Gaishi Automotive Research Institute, in 2024, Leap Motor's export volume to Europe will be only a few thousand vehicles. In 2025, the export volume will nearly reach 40,000 units, increasing by about ten times. By 2026, Leap Motor's exports to Europe will exceed 60% of the total for 2025 within just one quarter.

It is worth noting that the growth of Chinese brands is not driven solely by “low prices.” BYD has launched its premium sub-brand Denza in Europe; Chery’s brand portfolio in the Spanish market has already entered the top ten in private-channel sales. Foreign media comments have been rather blunt: the Mercedes EQA starts at just over €50,000, and at the same price point, Chinese brands clearly offer better specifications and longer driving ranges. “Consumers aren’t stupid.”

In the first quarter of 2026, of the 438,400 vehicles exported from China to Europe, battery electric vehicles and plug-in hybrids accounted for 45.2% and 24.2%, respectively, with year-on-year growth of 94.6% and 152.4%. In terms of growth by powertrain type, plug-in hybrids and extended-range vehicles are clearly growing faster than battery electric vehicles—precisely reflecting the market space left by the EU’s earlier additional tariffs on battery electric vehicles while plug-in hybrids have yet to be subject to such restrictions.

In this regard, analysts at the Gasgoo Auto Research Institute suggested that Chinese automakers should use long-range plug-in hybrid products that offer price parity with fuel vehicles as a key export weapon to circumvent high tariff barriers on pure electric vehicles, while allowing pure EV models to focus on low-tariff, high-penetration markets for brand incubation. This recommendation aligns with the view of NIO Vice President Zhang Hui, who said that Chinese automakers expanding into Europe should, on the basis of pure electric vehicles, increase the supply of PHEVs and HEVs. He stated bluntly: “For many Chinese automakers, this does not require additional model development; they only need to bring existing models from China to this market.”

Chinese brands seized this window of opportunity and rapidly introduced plug-in hybrid models to the European market, achieving a swift rise in market share within a short period. From less than 1% market share in 2021 to nearly 10% today, the presence of Chinese brands in Europe is no longer what it used to be.

Image source: BYD Auto

More importantly, this round of growth is not driven by a short-term volume spike from low-priced products—BYD has launched its premium sub-brand Denza in Europe, and Chery’s brand portfolio in the Spanish market has entered the top ten in private-channel sales. Chinese brands are moving from simply “selling cars” to “building brands.”

Analysts from Gasgoo Automotive Research Institute stated that Chinese automakers’ expansion into Europe has officially bid farewell to the “wild growth” era and has entered a systematic stage of global expansion: first selecting target segments and operating with precision, then aligning product engineering, and finally deploying production capacity in a tiered manner for in-depth market penetration. From the margins to the mainstream, from tentative exploration to deep cultivation—Chinese brands are completing a transformation from “intruders” to “participants.”

How “Stocking Up” Is Localized: Why the Contradiction Holds

The higher the tariffs, the stronger the incentive for localized production. This is precisely the underlying logic behind the paradox that “the higher the walls, the more cars there are.”

First, let’s calculate the tariff impact. Take a domestic automaker as an example: it is subject to an EU anti-subsidy duty rate of 17.4%, which, combined with the 10% base tariff, results in a total tariff rate of about 27.4%. For a vehicle priced at around EUR 32,000, the tariff cost per unit would be about EUR 8,700. With localized production, this cost can be reduced to zero directly, improving per-vehicle profit margins by about 15% to 20%.

In addition, the proposed IAA bill is expected to officially take effect as early as mid-2027, which means Chinese automakers have little time left, with a window of less than a year. This means that any plan to build a self-owned factory that would take two to three years to complete would be unable to achieve mass production before the law takes effect. Therefore, acquiring or leasing existing factories in Europe and completing retrofitting and production launch in the shortest possible time has become the only viable option for Chinese automakers.

As a result, a campaign to “snap up” European factories is accelerating. Chery has formed a joint venture with Spain’s Ebro Group, taking a 40% stake, to restart Nissan’s former Barcelona plant, which is expected to begin production by the end of 2026 or in the first quarter of 2027, with an initial annual capacity of 30,000 vehicles. Meanwhile, Chery has also signed a memorandum of understanding with Nissan to explore contract manufacturing at the Sunderland plant in the UK.

Image source: SAIC MG

MG, a brand under SAIC Motor, has chosen to build its own vehicle plant in Galicia, Spain, with a first-phase investment of about 200 million euros and an annual production capacity planned at 120,000 units, with production expected to begin in 2028. Leapmotor, meanwhile, has taken an asset-light approach by directly leveraging Stellantis’ Zaragoza plant in Spain, where mass production of the B10 model is set to begin in October 2026. In addition, automakers such as Geely, Dongfeng, and Xpeng are also advancing their respective European localization plans in countries including Spain, France, and Austria through measures such as acquiring production lines or entering into contract manufacturing partnerships.

According to a report released by a relevant agency in May, based on announced and reported deals, Chinese automakers could ultimately produce more than 2 million vehicles a year in Europe. Chinese car companies are accelerating this shift in business model, moving from reliance on complete vehicle exports to building local manufacturing capacity.

The reason this "buying spree" was able to go ahead is not only that Chinese automakers have a strong demand for localization, but also that European factories have a large amount of idle production capacity that urgently needs to be put to use.

The data show that the average capacity utilization rate of European vehicle assembly plants is only about 55%, far below the 80% breakeven threshold. For example, Stellantis’ European plants have seen capacity utilization fall to as low as 46%. As of December 2024, according to Jefferies, Stellantis had about 1.6 million units of unused capacity compared with its 2019 production level, while Volkswagen Group had 800,000 more units than Stellantis over the same period. In just the past year, Audi’s Brussels plant, Nissan’s Barcelona plant, and Ford’s Saarlouis plant in Germany have successively announced closures or production suspensions.

With long-term overcapacity, fixed costs such as equipment depreciation and routine maintenance do not decrease as output falls, and idle capacity continues to generate losses every day. For European automakers, cooperating with Chinese automakers is a practical way to put assets to use and preserve jobs. As industry observers have noted, this is not a one-sided “invasion,” but rather a two-way move toward each other.

Image source: CATL

Moreover, due to lagging battery technology and high raw material costs, the manufacturing cost of electric vehicles in Europe is at least 30% higher than in China—a gap that will be difficult to bridge in the short term. Chinese automakers entering Europe with technology and capital are, in effect, using “Chinese efficiency” to activate “European production capacity.”

From another perspective, the EU's push for localization is not entirely defensive. Through equity ratio restrictions and local content requirements, the EU aims to maintain control over its industries while attracting Chinese investment.

This is a game of strategic maneuvering: Chinese automakers use localized production to circumvent tariff barriers, while the EU uses regulations to lock in local jobs and technology retention. Each side gets what it wants, yet both remain wary of the other.

Beyond imposing countervailing duties on Chinese battery electric vehicles, the EU is now also poised to levy countervailing duties on Chinese-made plug-in hybrids. Yet sales and market share of Chinese brands in Europe continue to rise. What appears to be a contradiction is in fact mutually reinforcing: the higher the tariffs, the more they compel Chinese automakers to accelerate their localization efforts.

Once localized production is established, market share growth will no longer rely solely on cost-effectiveness for volume, but will be supported by real production capacity. This shift from "export" to "manufacturing" is reshaping the underlying logic of Chinese automotive exports.

As Wu Mei, General Manager of Joyson Electronics Europe, noted, the physical establishment of production capacity is only the beginning. For Chinese automakers, the real challenge lies in whether they can build “predictable” trust in Europe—from aligning on engineering language and improving decision-making speed to reliably delivering on commitments. Walls can be bypassed, but there are no shortcuts to building trust.