Chinese automakers turn to hybrids in Europe to dodge EV tariffs

Shanghai, China

As Europe diversifies its automotive imports away from the U.S. and Japan, Chinese automakers are bankrolling hybrid exports to Europe to exploit a loophole in European Union electric vehicle (EV) tariff policy. The Chinese marquis do not need to mind the EU’s new tariffs on Chinese made EVs because these apply not to hybrids, which is fortunate for BYD (China's leader among battery manufacturers) and its partners as they want to expand throughout the region.  

Even to compensate for tariff costs, Chinese manufacturers are also expanding production and assembly in Europe. The shift follows EU tariffs of up to 45.3 percent on Chinese EV imports from late October aimed at what the European Commission describes as unfair subsidies.  

Chinese automakers are using plug in hybrids (PHEVs) to bypass the EU’s tariffs on battery electric vehicles (BEVs), and account for the rise in hybrid exports, said Murtuza Ali, an analyst at Counterpoint Research. China's exports to Europe via the hybrid route are forecast to reach 20-percent growth this year and faster growth in 2024, he predicts.  

That strategy is already changing the way China exports its vehicles to Europe. Hybrids accounted for 18 percent of Chinese car exports to the EU in the third quarter, vs. 9 percent in the first quarter, as sales of BEVs declined to 58 percent from 62 percent.  

Competitive Pricing and New Models

First plug in hybrid model to Europe BYD brings the Seal U DM-i to leading the charge having started at a price of €35,900. Volkswagen’s Tiguan PHEV is undercut by the model by €700 and 10% cheaper than Toyota’s C-HR PHEV. Reports also say BYD is exploring EV and hybrid production at its Hungarian facility.  

China’s second largest automaker, Geely, has in recent times launched a plug-in hybrid under its Lynk & Co brand in Europe, while SAIC diversifies its powertrains in an effort to reduce its highest EU tariff of 35.3% on EVs.  

Pressure and Opportunities  

Amid rising inflation, Chinese automakers aim to disrupt the European hybrid market, long dominated by European and Japanese brands, by offering more affordable, fuel-efficient models. However, experts caution that aggressive pricing could provoke further EU trade restrictions. “The introduction of low-cost models like BYD's Qin Plus could spark another trade conflict,” warned Yale Zhang of Automotive Foresight.  

With U.S. and Canadian EV tariffs at 100%, Europe remains a critical market for Chinese automakers navigating overcapacity challenges and growing global competition.