Chinese automakers expand in Europe to avoid EU tariffs

Chinese automakers are expanding their manufacturing presence in Europe amid intensifying competition and excess production capacity in their domestic market, as per a report by The Korea Herald.

According to the report, Chinese automakers, including BYD, Chery and Geely, are shifting production closer to European markets amid intense domestic competition and excess manufacturing capacity. Beyond avoiding European Union (EU) tariffs, these companies are leveraging underutilised factories and local partnerships to establish a long-term presence in Europe's automotive industry.

At the same time, it noted, for Hyundai Motor Group, which has spent decades building a European manufacturing network, the transformation brings a “formidable new challenge” as Chinese rivals increasingly compete on its turf.

On the other hand, BYD is leading China's localization push, preparing to begin production at its new plant in Szeged, Hungary, this year. The facility, designed for an eventual annual capacity of 300,000 vehicles, will become BYD's first European passenger-car production base. It is expected to manufacture compact electric models, including the Dolphin Surf and Atto 2.

BYD faces an additional tariff of 17 per cent, while Geely and SAIC Motor face levies of 18.8 per cent and 35.3 per cent, respectively.

Thus, setting up manufacturing facilities within the EU would enable Chinese automakers to avoid these additional import tariffs, lower shipping costs and strengthen ties with local suppliers.

Notably, other Chinese manufacturers are pursuing similar strategies. SAIC Motor, which sells vehicles primarily under its MG brand, has explored plans for a European production facility as it seeks to reduce reliance on imports from China, the report said.

Additionally, “Chinese automakers are increasingly forming alliances with established manufacturers that are struggling with sluggish demand, costly electrification investments and underused production capacity.”

It should also be noted that Chinese brands' European sales jumped 90.6 percent year-on-year to 531,862 vehicles in the first half of 2026, The Korea Herald reported, citing market research firm MarkLines.

“Chinese manufacturers are expanding beyond battery-electric vehicles into plug-in hybrids and conventional hybrids,” it noted.

While this shift may help the struggling European factories stay open, it also raises questions about the region's growing reliance on China. - ANI