Car manufacturers BYD and Chery are deliberately focusing on hybrid vehicles to benefit from lower tariffs when they are exported to Europe.
In the face of escalating tariffs on battery-electric vehicles (BEVs) in the European Union, Chinese automakers are adapting their strategies to maintain a strong presence in the region.
Despite EU tariffs of up to 45.3% imposed in late 2024 to counteract what Brussels views as unfair competitive advantages due to Chinese subsidies, Chinese BEV exports to the EU have not shown a sustained decline. Instead, data indicate that exports of plug-in hybrid electric vehicles (PHEVs) and hybrid electric vehicles (HEVs) from China, which are exempt from these tariffs, have increased noticeably.
This flexible market response by Chinese automakers is reflected in the growing local production of these vehicles within the EU. Companies such as BYD, Chery, and Polestar are investing in local production facilities in Europe, with BYD establishing a plant in Hungary, Chery in Spain, and Polestar in Slovakia. This localization serves both to sidestep tariffs and to establish a lasting presence in European markets, although it also invites regulatory scrutiny, as seen with EU probes into foreign subsidies at BYD’s Hungarian plant.
BYD, a leading Chinese automaker, has seen significant success in the European market. In March 2025, its BEV sales more than doubled to 4,633 units compared to the previous year. However, the company's PHEV sales now nearly match these figures, indicating a significant shift in focus towards PHEVs. In the same month, BYD and Chery sold 3,269 and 757 PHEVs, respectively, in the European Union markets.
The increased sales of PHEVs by both BYD and Chery suggest a strategic move to avoid EU tariffs on BEVs. The demand for BEVs by European consumers is slowing, leading to companies like Stellantis joint venture partner Leapmotor offering a gas-generator extended-range electric vehicle powertrain option for its new C10 midsize SUV.
Didi Bostock, membership editor for Rho Motion, stated that the shift towards hybrids by Chinese brands was expected and a result of finding a "backdoor" to the EU market. The switch to hybrids is a clear move by Chinese brands to avoid EU tariffs on their BEVs, in addition to the EU's standard 10% import duty. This is a significant increase from virtually none at all since the European Union introduced tariffs against automakers whose BEVs were judged to be unfairly subsidized by the Chinese state last summer.
The negotiations between the EU and China to relax some tariffs are in response to punishing tariffs on automobiles imposed by the U.S., which are affecting both trading partners' auto industries. This temporary move towards hybrid vehicles by Chinese brands is expected to change as these negotiations progress.
In summary, Chinese BEV exports to the EU have remained resilient despite tariffs, sales of Chinese PHEVs and HEVs (not subject to the tariffs) have grown significantly, Chinese automakers are increasingly localizing production within the EU to reduce tariff exposure, and pricing is moderated by political considerations to avoid triggering further trade restrictions. This flexible and multifaceted response enables Chinese manufacturers to sustain their European market presence while adapting to the tariff environment.
- The resilience of Chinese BEV exports and the significant growth of Chinese PHEV and HEV sales indicate an strategies adaptation by Chinese automakers to maintain a strong presence in the European Union, leveraging technology such as hybrid vehicles and local production facilities.
- In response to tariffs imposed on battery-electric vehicles in the European Union, Didi Bostock, a membership editor for Rho Motion, pointed out that the shift towards hybrids by Chinese brands was a finding of a "backdoor" to the EU market, resulting from a strategic move to avoid tariffs using technology like hybrid vehicles while awaiting negotiations to relax some tariffs.
