EU deal hastens need for BYD, Chery to build Chinese cars in Europe

Published Mon, Oct 12, 2026 · 03:56 PM

[PARIS] Chinese automakers led by BYD will show off a wealth of new plug-in hybrid models at the Paris car show taking place from Monday (Oct 12) to Sunday, underscoring how entrenched they have become in the lucrative European market.

That will not change, even as the EU moves to limit imports of hybrid cars, a measure analysts said will slow but not stop China’s expansion in the region.

In fact, the likes of BYD and Zhejiang Leapmotor Technology are expected to hasten plans for setting up EU production capacity instead, cementing their role in a market meant to help them sidestep near-ruinous pricing competition at home.

A cap on hybrid imports “will speed up Chinese carmakers’ localisation of manufacturing in Europe for sure”, said Li Yanwei, who advises the China Automobile Dealers Association.

Many of their top-selling models in Europe are larger sport utility vehicles that offer attractive margins, he added.

Much remains uncertain about the new hybrid quota, including if the EU and China have agreed on a hard cap of 350,000 units, or one that would prompt tariffs if that barrier is breached.

It is clear, however, that none of Europe’s past efforts have stopped the Chinese expansion.

In 2024, Brussels slapped tariffs on fully electric cars from China. While the growth of Chinese electric-vehicle sales in Europe has since slowed, many of the companies’ battery-powered models remain competitive despite the duties.

Chinese brands also pivoted quickly to hybrids that were not affected by the levies. They captured around 26 per cent of Western Europe’s plug-in-hybrid market in the second quarter, up from just 2.2 per cent two years earlier, said the Schmidt Automotive Research.

Some companies have a head start on local production.

Leapmotor is due to start shipping cars from a Stellantis factory in Spain in October. BYD plans to start output at its new plant in Hungary in 2026.

Volkswagen has said it is open to sharing underused factories with the Chinese, as it fights to whittle down production costs and reduce complexities.

Manufacturing is just the first step

The Chinese winners from the new trade policy “will be the ones with the deepest operating footprint in Europe”, Jefferies analysts said in a note, adding that manufacturing is just the first step.

“Suppliers, channels, financing and regulatory compliance matter just as much,” they said.

Most industry experts expect the import cap to slow the sales growth of the Chinese in the EU in the short term, as well as intensifying competition in the hybrid segment, which accounts for nearly half of the bloc’s car sales.

Chinese hybrid sales in the EU will jump to an estimated 435,000 units in 2026, Bernstein analysts said on Sunday.

That is well above the reported cap and based on their roughly 290,000 sales through August.

But over a longer time span, Chinese automakers are likely to bet that they can remain competitive, even with the trade barriers. They have already poured resources into setting up extensive dealer networks and redesigning models for the needs of European customers.

In Paris, BYD is showcasing the Dolphin G DM-i, a compact car developed for Europe’s narrow city streets and small parking spaces.

Stellantis’ Chinese partner Zhejiang Leapmotor Technology is unveiling its D19 range-extender model that offers more than 300 km of electric-only driving, and a suspension and handling mimicking that of a European luxury car.

The region’s domestic manufacturers are nevertheless optimistic that the hybrid cap can help level the playing field in Europe, where personnel, energy and supply chain costs are much higher than in China.

The EU-China agreement is “good news”, Renault CEO Francois Provost told Bloomberg Television on Monday. “They’re allowed to come in Europe, to invest deeply in the value chain, to create jobs.” BLOOMBERG