The European Commission announced additional import tariffs on Chinese battery electric vehicles (BEVs) on July 4, 2024, after manufacturers were deemed to have unfairly benefited from state subsidies, in the hope of leveling the playing field for the domestic automotive sector.

The definitive countervailing duties came into effect in October that year, subjecting Chinese exporters to different treatments for a period of five years. SAIC Group and “other non-cooperating companies” were hit with a 35.3% import tariff on top of the existing 10%, while Geely, BYD, and Tesla (Shanghai) got 18.8%, 17%, and 7.8% respectively.

German daily Handelsblatt reported on June 19 that the commission is also planning to impose countervailing duties on Chinese plug-in hybrid vehicles (PHEVs) that had previously been spared.

What is the market share of Chinese carmakers now?

Registrations of Chinese-branded cars across Western Europe have continued to grow despite the tariffs. Chinese carmakers overtook Japanese rivals in Europe in May, selling 6% more vehicles, thanks to aggressive exports and competitive pricing.

A record 273,051 cars made by Chinese manufacturers were registered in the first quarter of 2026, with volumes surpassing those from South Korea at 223,300 for the second consecutive quarter, according to research provided by Schmidt Auto Research. The share of Chinese cars built in China and elsewhere rose 3.9 percentage points year-on-year to 8.7% in the first quarter.

Ferdinand Dudenhoeffer, director at the Center for Automotive Research, a German think tank, estimates that Chinese manufacturers will sell about 800,000 new cars in the European Union (EU) this year.

“Surpassing the one million mark by 2027 is already a certainty for the Chinese,” Dudenhoeffer said.

How did Chinese automakers expand their market share despite tariffs?

Chinese carmakers reacted to the tariffs by pivoting to plug-in hybrid cars and traditional combustion-based models. BYD, for example, moved from selling only fully electric cars to focusing on expanding hybrid offerings. The BYD Seal U was the most popular plug-in hybrid model in Europe in 2025, with 65,866 cars sold.

“These drivetrains don’t see the anti-subsidy tariff element applied, and have contributed to the Chinese carmakers’ collective market share continuing to rise,” said Matthias Schmidt, founder of Schmidt Automotive Research.

They have also been able to undercut European and other Asian brands. For example, the BYD Seal U is substantially cheaper than the Kia Sportage.

In EVs, the Chinese manufacturers are also offering competitive prices, such as Leapmotor’s T03 model.

Analysts said that German purchase subsidies for both drivetrains, up to EUR 6,000 (USD 6,850.9) for some households, will help Chinese manufacturers even more this year.

How did China respond to EU tariffs?

China initially warned that the levies could spark a trade war. A spokesperson from the Ministry of Commerce said “responsibility lies entirely with the EU side” just as Robert Habeck, Germany’s then-economy minister, started a three-day visit in Beijing. In practice, China’s response has actually been relatively moderate.

Beijing did lash out at European countries that supported the tariffs. For example, it imposed retaliatory tariffs and anti-dumping duties on French alcohol and Spanish pork, and ordered Chinese automakers to pause factory investments in Poland.

“Beijing has exerted pressure but has not launched a full-scale trade war against Europe, suggesting that China still views the European market as too strategically important to jeopardize through escalation,” said Lutz Berners at Berners Consulting, which advises the German government and businesses on China-related projects.

He said Beijing is actively undermining US and EU laws by forbidding Chinese companies from complying with transparency requirements.

What will Chinese carmakers do next?

Some Chinese carmakers will avoid the existing tariffs on BEVs and any looming tariffs on PHEVs by assembling models locally. For example, GAC and Xpeng are having their vehicles manufactured under contract by Magna Steyr in Austria.

BYD and Leapmotor plan to ramp up their own factories in Hungary and Spain respectively before the end of the year. SAIC will begin manufacturing vehicles in Spain starting in 2028. Geely-owned Polestar plans to mirror this move in 2028, establishing European manufacturing for the Polestar 7 at Volvo Cars’ newly developed plant in Slovakia.

Meanwhile, Chery is expected to continue leveraging its joint venture site in Spain, according to Schmidt Auto Research.

“Normally you need at least 60,000 in annual volume for a passenger car investment to make sense, but with these high tariffs, the European Commission pushed the Chinese companies to invest earlier than planned,” said Mattias Bergman, the CEO of Mobility Sweden, which represents Swedish automakers.

“Many European companies will now co-operate with Chinese companies on existing production sites and technology,” he said.

Have tariffs leveled the playing field for European carmakers?

It has partially worked in terms of bringing in investment from the Chinese but less so in arresting the slide of the European industry.

“The next stage to get around the EU’s tariff strategy is to reshore production to Europe, where you can argue it is working as they are bringing more of the value chain to the EU,” Schmidt said.

Dudenhoeffer thinks the tariffs have achieved nothing more than cause friction between the EU and China.

“In terms of setting up local production, the Chinese are now moving much faster than the Japanese and Koreans,” he said. “Without tariffs, those factories wouldn’t have sprung up so quickly, and the European carmakers would have had more time to better adjust to the new competition.”

“The EU’s approach is not working,” Dudenhoeffer said. “You cannot protect yourself with tariff walls—protection comes only through technology, which needs to be developed more rapidly in Europe.”

The German automotive sector now appears to be in a deeper structural crisis than it was two years ago. Major manufacturers such as BMW, Mercedes-Benz, and Volkswagen, along with their suppliers, face weak market demand, significant overcapacity and massive drops in profit.

Reports of radical cost-cutting plans at Volkswagen caused a stir in late June. According to media reports and unions, up to 100,000 jobs worldwide are at risk. In Germany, four plants reportedly face closure.

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.

Note: EUR figures are converted to USD at rates of EUR 0.88 = USD 1 based on estimates as of July 8, 2026, unless otherwise stated. USD conversions are presented for ease of reference and may not fully match prevailing exchange rates.