Just over a month after the European Union’s steep electric vehicle import tariffs took effect, Chinese carmakers are already testing the limits of the scheme by pivoting to hybrid vehicles.
The EU’s tariffs targeting Chinese EV-makers do not apply to hybrid cars — vehicles that run on a combination of gasoline and electricity.
That has led Chinese automakers like BYD, Geely and SAIC to ramp up exports of hybrid vehicles to Europe and plan more models for the key market.
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In the third quarter, exports of plug-in hybrids and conventional hybrids accounted for 18% of China’s total vehicle sales to Europe. That was double their 9% share in the first quarter.
The proportion of EV shipments, meanwhile, fell to 58% from 62% during the same period.
“The increase is driven by Chinese OEMs shifting toward PHEVs (plug-in hybrids) as a way to sidestep the new EU tariffs on BEV (battery-powered EVs) imports from China,” Murtuza Ali, an analyst at Counterpoint Research, said.
He expects China’s hybrid exports to Europe to grow 20% this year and even faster next year.
New launches, production shifts
The trend could lead Chinese automakers to upend the European plug-in hybrid market as they meet rising demand for affordable cars with better fuel economy amid rising inflation. European and Japanese firms have dominated the market so far.
China biggest EV-maker, BYD, for instance is taking on Volkswagen and Toyota in Europe with its first plug-in hybrid model for the region, the Seal U DM-i.
The model is priced from 35,900 euros ($37,700), 700 euros lower than VW’s best-selling PHEV model Tiguan and 10% cheaper than Toyota’s C-HR PHEV.
Meanwhile, Geely, China’s second-largest automaker by sales, launched a new plug-in hybrid under its brand Lynk & Co for Europe last month.
State-owned SAIC, whose EV exports to the EU face the highest additional rate of 35.3%, has also said it plans products with various powertrain systems for the European market.
Some manufacturers are also shifting production and assembly to Europe to lower the cost around tariffs.
BYD is considering production of both EVs and hybrids in its Hungarian plant, Chinese official media China Auto News reported.
Growing popularity
Hybrid cars are gaining in popularity across the world as buyers consider them an affordable compromise between all-combustion and all-electric vehicles.
In China, hybrid cars have driven sales of the country’s top EV-makers to record highs this year.
Hybrid exports to Europe also more than tripled to 65,800 units from July to October, compared to the same period a year earlier, reversing a trend of sliding sales until earlier this year and in 2023, according to China Passenger Car Association data.
“The recent increased introduction of electrified hybrid models to markets around the world by global automakers is in line with consumer demands and purchasing trends,” carmaker Geely told Reuters.
Yale Zhang, managing director at Automotive Foresight said, “the segment could see bigger growth potentials with Chinese automakers bringing more affordable options to Europe that are attractive to cost-sensitive consumers.”
But experts caution Chinese firms are likely to tread more carefully for fear of sparking another round of EU tariffs, considering the levies were part of a larger push by the bloc to stem the inflow of cheap Chinese products.
“If BYD takes Qin Plus to Europe at a price of 20,000 euros, I am sure it would trigger another earthquake,” Zhang said, referring to the carmaker’s hybrid sedan launched early this year.
- Reuters, with additional editing by Vishakha Saxena
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