The EU’s Failed Strategy: Tariffs Boost Chinese Hybrid Cars in Europe

However, the strategy appears to be faltering. Instead of stalling sales, the tariffs redirected demand. Chinese manufacturers focused on models that evade the higher costs.

The EU’s decision to impose extra tariffs last November aimed to protect the market. However, Jeffries managing director Philippe Houchois explained that the EU’s decision to target a specific technology was “ill-fated.”

Chinese manufacturers have leveraged this gap. Production costs in China are up to 30 percent cheaper than in Europe. Therefore, it does not make financial sense to relocate production. As a result, they have shifted their European strategy toward models that sidestep the higher costs.

China’s Shift Towards Hybrids

The EU decision left “a big hole open” for full hybrids and even hybrids coming from China. This tactic is working.

In early 2024, EVs accounted for 44 percent of Chinese car sales in Europe (January-October). This share has dropped to 34 percent in 2025. Consequently, about two-thirds of the Chinese vehicles imported into Europe this year have only been subject to the standard 10 percent duty.

Local Production: The Exception to the Rule

The relocation of Chinese manufacturing to Europe remains rare. Fewer than 20,000 Chinese-brand vehicles are expected to be assembled in Europe this year. BYD plans to change that with a new plant in Hungary. This plant will be capable of producing up to 150,000 units annually.

For now, it is an exception. Other manufacturers are evaluating sites. Leapmotor is preparing to build the B10 in Spain. GWM has ambitions to produce up to 300,000 vehicles in the region by 2029. Dongfeng and Hongqi are also evaluating European sites. Brands like Chery, Xpeng, and GAC already assemble a limited number of vehicles locally.