Europe’s Auto Industry Faces an Existential Test From China’s EV Surge
- Chinese automakers have rapidly surpassed European competitors on cost, scale, and increasingly on quality, despite EU tariffs.
- Subsidies, economies of scale, and global price wars have enabled Chinese cars to undercut European brands across multiple segments.
- With jobs, industrial know-how, and strategic autonomy at stake, Europe faces dwindling time to mount an effective response.
Two decades into a successful career manufacturing interiors for the world’s leading auto brands, Tomas, a former senior manager with an Italian multinational company, walked away from the car industry in the autumn of 2025.
“I think it's doomed,” the Czech man told RFE/RL, explaining the main reason he walked away from the business. “The industry is doomed.” Tomas has asked that his surname not be used in this story.
Europe’s storied car industry is under threat from a flood of high-quality Chinese vehicles with impossibly aggressive price tags -- some as low as 10,290 euros ($12,141) in specific markets -- that began arriving on the continent especially after the COVID pandemic. Experts warn the influx endangers an industry that has served as the foundation of European manufacturing for decades.
Despite tariffs introduced by Brussels in 2024 of up to 35 percent on some Chinese electric vehicles (EVs) on top of a 10 percent import duty, Chinese vehicle sales into Europe nearly doubled between 2024 and 2025, with more than half a million Chinese models sold in the first nine months of this year.
Chinese EV giant BYD reported a year-on-year sales increase of 225 percent to become the top-selling electric vehicle maker in the EU through some months of 2025 despite tariffs. Other manufacturers dodged the EU trade barriers on EVs by shipping combustion engine vehicles and hybrids not subject to the same duties.
Beijing's car industry dates back to the 1950s, but its manufacturers have long been dogged by a reputation for poor quality and clunky style, which kept their international footprint to a minimum. That all changed recently.
Before the world’s economy ground to halt in 2020 amid the coronavirus pandemic, Tomas said that technical professionals in the European car industry dismissed Chinese brands, saying, “they’re horrible, they can’t build. They’ll need 20, 30, 40 years to come to our level and we will be much further ahead by then.”
“What happened is basically in five years, they exceeded us,” he said. “Now their cars are actually amazing.”
A Perfect Storm
Chinese manufacturers have long enjoyed a cost advantage for the country’s use of cheap, mostly coal-fired energy, and a labor force with minimal bargaining power, but a recent perfect storm of factors has allowed Chinese cars to be priced far below Western competitors.
In response to the Kremlin's 2022 invasion of Ukraine, the EU banned steel imports from Russia. China, meanwhile, has massively increased its imports of high-quality metals from the country.
Additionally, China’s car industry has been able to leverage unprecedented economies of scale through the past decade.
The country’s car industry was already the world’s largest by 2009, but manufacturers were mostly focused on the country’s oversaturated domestic market. That changed as intense price wars within China pushed manufacturers to look outwards. In 2023, China overtook Japan to become the world’s largest car exporter, producing tens of millions of vehicles each year.
Then, there are alleged subsidies.
China has denied it props up automakers, but an EU investigation in 2024 found that public money was “detected across the entire supply chain,” from mines extracting raw materials to the ships hauling finished electric vehicles to Europe.
The United States imposed a 100 percent tariff on Chinese electric vehicles in 2024 after their own investigation concluded that the US auto industry was being "materially injured" by some subsidized Chinese models.
Paul Bennet, a managing partner at the UK-based automotive advisory firm Madox Square, told RFE/RL that the blitzkrieg entry of Chinese vehicles into the European market may be about more than business.
“Overall, while the economic benefits are clear, the geopolitical aspects of this strategy shouldn't be overlooked,” he said. “In my opinion, it's likely part of China's broader efforts to reshape global economic dynamics and enhance its position on the world stage.”
While some insiders say that Europe may still have opportunities to counter, time is running out. Bennet wrote in September that the future of the continent's auto industry, which employs some 13.2 million people, and supports millions more jobs in dependent businesses, now “hangs in the balance.”
Hedging Against Tariffs
Under current market rules, a Chinese vehicle produced inside the EU would not be subject to the same tariffs as those imported from outside the bloc. Chinese manufacturers are moving fast to exploit that condition.
China’s BYD is in the process of establishing a $4.6 billion factory in Hungary, and in
Barcelona, cars are already being produced by a joint venture between Spain’s Ebro-EV Motors and China’s Chery brand. There are ongoing talks for further manufacturing bases in other EU countries, including in Italy and Poland. Additionally, manufacturing sites have been established by Chinese auto brands in Serbia.
Bennet told RFE/RL that Serbia was likely chosen for a range of factors, including Belgrade's free trade agreements with Russia and the EU, and Serbia's potential future European Union membership, making the country, "an attractive long-term investment potentially offering easier access to EU markets in the future."
Many of Europe's car brands, meanwhile, are facing a shrinking consumer base for their cars in China -- once a key market -- as well as on home soil amid the surge in imported Chinese car sales in Europe.
Bennet has called for carmakers to pressure the European Commission into mandating joint ventures that are majority owned by European brands wherever Chinese companies establish a manufacturing footprint inside the EU.
Others have called for the EU and the United States to open their markets to one another, while blocking out China. Beijing and Brussels have also restarted negotiations over a minimum price floor for Chinese EVs on the European market to limit how severely local automakers can be undercut.
Industry veteran Tomas worries that if current trends continue, Europe’s wider industrial base may be in danger. He fears “much bigger consequences than we can think of now, like the loss of industrial self-sufficiency and know-how, leading to huge security risks in the future.”
The auto sector, he says, remains “the biggest industrial driver and crib for young engineers, with careers in defense, research, and development.”
Tomas says he struggles to imagine a political solution to the economic threat to Europe’s auto makers.
But, he adds, “I hope I am wrong, I really hope I am wrong.”
By RFE/RL
By AFP
January 1, 2026
BYD has come to dominate China's new energy vehicle market -- the world's largest - Copyright AFP/File Idrees MOHAMMED
Chinese auto giant BYD sold 2.26 million electric vehicles last year, a company statement showed Thursday, setting a new record for any firm globally.
The figure puts BYD in pole position to outstrip Elon Musk’s Tesla in the annual category for the first time, with the lagging Texas-based firm having previously announced 1.22 million in 2025 EV sales by the end of September.
Tesla is expected to announce its total EV sales for last year on Friday.
Shenzhen-based BYD, which also produces hybrid cars, announced the data in a statement published to the Hong Kong Stock Exchange, where it is listed.
Known as “Biyadi” in Chinese — or by the English slogan “Build Your Dreams” — BYD was founded in 1995, originally specialising in battery manufacturing.
The automotive juggernaut has come to dominate China’s highly competitive new energy vehicle market — the world’s largest.
Now it is seeking to expand its presence overseas, as increasingly price-wary consumption patterns in China weigh on profitability.
BYD and its Chinese competitors face hefty tariffs in the United States.
But its success is growing in Southeast Asia, the Middle East, and even Europe — to the consternation of traditional industry heavyweights from the continent.
Tesla narrowly beat BYD in annual EV sales in 2024, with US company’s 1.79 million just outpacing the latter’s 1.76 million.
This year, Musk’s firm has seen sales struggle in key markets over the CEO’s political support of US President Donald Trump and far-right politicians.
Tesla has also faced rising EV competition from BYD and other Chinese companies, as well as from European giants.
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