The European Union is caught in a dilemma over low-priced Chinese cars. The bloc needs to raise trade barriers and favor vehicles built within the EU to stop Chinese brands from eating into its market, but doing so would drive up the price of EU-made cars. That could backfire with European consumers who are turning to Chinese vehicles precisely because they are cheaper.
The New York Times reported on the 12th that competition in Europe's auto market is shifting rapidly as Chinese automakers accelerate their push into the region to avoid steep U.S. tariffs.
Chinese brands now account for about 10% of new cars sold in Europe, up from roughly 1% five years ago. BYD, China's largest electric-vehicle maker, more than doubled its European sales this year, while Chery Automobile has grown even faster. Chery's Jaecoo 7 sport-utility vehicle was the best-selling car in Britain in September.
Chinese automakers are also pressing into Germany, the heart of Europe's auto industry. BYD plans to expand to as many as 300 dealerships by the end of this year, aiming to build a network dense enough that German buyers never have to travel more than 20 minutes to purchase a car. China's Xiaomi is also preparing to enter the European market in partnership with eight German auto dealers.
Price is the biggest selling point for Chinese cars. According to the Center for European Policy Analysis, BYD electric vehicles sold in Europe start at an average of 30,000 to 45,000 euros (about 45 million to 67 million won), below the roughly 50,000 euros (about 75 million won) for European-made electric vehicles. Ferdinand Dudenhoeffer, a German auto industry expert, said consumers care more about price than about whether a car is made in China or Germany.
The low-price offensive is weighing heavily on Europe's auto industry, which accounts for about 7% of EU economic output. The German Association of the Automotive Industry has projected that as many as 225,000 jobs in the sector could disappear by 2035. Citi Research forecast that without regulatory action, Chinese automakers' share of the European market could expand to as much as 30% by 2035.
The EU already imposed tariffs of up to about 45% on Chinese battery-electric vehicles in 2024 in response to Chinese government subsidies. But exports of hybrids, which were excluded from those measures, surged, exposing the limits of the effort to keep Chinese automakers out of Europe.
Chinese automakers expanded sales of plug-in hybrid vehicles and conventional hybrids, which face relatively lower tariffs. Chinese brands now hold more than 20% of Europe's hybrid market, and their share of the plug-in hybrid market has topped 50% in Poland, Hungary and Romania.
In response, the EU has worked out an agreement with China that would sharply reduce imports of Chinese hybrids over the next four years. How it will be implemented remains unclear.
The problem is that higher trade barriers could mean a heavier burden for consumers. David Bailey, a professor at the University of Birmingham in Britain, said protectionism could ease competitive pressure on European automakers but consumers may have to accept higher prices and fewer choices.
Analysts say a policy under EU review that would favor batteries made within the bloc could also push up electric-vehicle prices. According to Bruegel, a Belgian think tank, rules favoring European-made batteries could raise the price of an electric vehicle by about 2,100 euros (about 3.15 million won) per unit.
Simone Tagliapietra, deputy director at Bruegel, pointed to middle-income households as the group that would shoulder the greatest burden from such measures. Higher car prices could put electric vehicles out of reach for those buyers.
Chinese automakers are also expanding local production in Europe in response to tighter EU rules. BYD is moving ahead with vehicle production in Hungary, and Leapmotor is pursuing a manufacturing partnership with European automaker Stellantis. The shift away from an export-driven strategy toward local manufacturing is aimed at longer-term market expansion.
Chinese brands are also growing quickly in Spain. The number of Chinese-brand dealerships, about 600 at the end of last year, is expected to reach 1,000 by the end of this year. Chinese brands' share of the Spanish market has risen fivefold over the past three years to about 15%.
Chinese automakers are rapidly widening their foothold in Europe on the strength of price competitiveness, the New York Times said, but if the EU tightens regulations to protect its own industry, consumers could pay the price in higher car prices.