The Chinese automotive industry is facing a second crisis in the European market. Following the European Union's (EU) imposition of high tariffs on Chinese electric vehicles in 2024, the EU has now decided to restrict exports of hybrid vehicles as well. However, there is a sense within the Chinese industry that this measure can be overcome.
Chinese automakers accelerated their efforts to penetrate the European market around 2020, leveraging their electric vehicle technology and price competitiveness developed in the domestic market. However, the first crisis emerged in October 2024 when the EU imposed additional countervailing duties of up to 35.3% on Chinese pure electric vehicles.
In response, Chinese companies sought refuge in plug-in hybrids (PHEVs), which were excluded from the high tariffs. The import volume of Chinese plug-in hybrids in the EU surged from 3,800 units in October 2024 to 50,000 units by July 2026, marking an increase of nearly 13 times. In the year leading up to September 2026, imports of Chinese plug-in hybrids in the EU rose by 86% compared to the previous year, demonstrating how tariff barriers on pure electric vehicles have spurred the rapid growth of hybrids.
On October 10, the EU applied the brakes once again. China agreed to reduce hybrid vehicle exports by more than half from the expected trend over the next four years. However, this does not mean a simple halving of current export volumes. According to a plan reported by the Financial Times, the export cap for 2027 will start at 350,000 units and increase by 6% each year. If this trend continues, exports could reach approximately 420,000 units by 2030. While detailed implementation plans require further negotiation, it indicates that Chinese companies will not be completely pushed out of the European market.
Export restrictions do not necessarily equate to losses. Chinese companies have been engaged in fierce price competition in the domestic market and have endured cutthroat competition abroad to gain market share. Limiting export volumes could alleviate excessive low-price competition and enhance profitability.
More importantly, local production is becoming a focus. Companies like BYD and Chery are pushing to build factories in Europe and expand local production. Vehicles produced locally can avoid export volume restrictions, providing a strong incentive to shift from an export-centric business model to one focused on local production. By relocating production bases and supply chains to Europe, Chinese companies can enhance market accessibility while securing local employment and consumer trust.
The second crisis facing the Chinese automotive industry in Europe is significant. It is expected that the industry will respond by adjusting export volumes while strengthening localization efforts.
* This article has been translated by AI.
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