Racing Against Headwinds: The European Push of Chinese EV Manufacturers
Chinese Electric Vehicle Brands Face Challenges in European Expansion: An Examination of BYD, Nio, and Leap Motor's Struggles in the Continent
Chinese electric vehicle (EV) heavyweights like Nio, BYD, and Leapmotor are charging into Europe with big ambitions, but they're encountering a storm of obstacles.
The EU tariffs on Chinese EVs and the soaring shipping costs are causing a considerable ruckus. Despite the challenges, brands such as BYD, Zeekr, and Nio continue to forge ahead with their European strategies — BYD eyes delivering around 20 percent of its exports to the EU by 2025, initially with hybrid models to skirt tariffs.
Back in November 2024, Leapmotor CEO Zhu Jiangming confidently declared that European soil was the perfect ground for his company's expansion. He touted significant economies of scale in China, which would pave the way for production cost reductions and investment in cutting-edge technology.
But lately, the winds have changed. Chinese automakers face roadblocks in their quest to grow their footprint in Europe. Jiangming and other CEOs have scaled back their sunny outlooks, as the rapid success of Chinese EVs has triggered trade countermeasures in the US and the EU. The EU even imposed tariffs of up to 45 percent on Chinese EVs in 2023. Meanwhile, market access for Chinese manufacturers remains virtually non-existent in the US.
"Miscalculations were definitely made in our initial planning," Nio CEO William Li admitted at the Shanghai Auto Show, but emphasized the company's undeterred determination to conquer Europe. Leapmotor CEO Jiangming recently confided that "the 30.7 percent tariff and the 10 percent shipping costs together have seriously undermined our competitive edge in Europe." Automobile analyst Matthias Schmidt also notes a slowdown, stating, "The anti-subsidy tariffs seem to have stalled market penetration."
China's share of the EU EV market remains paltry at 4.3 percent in the first two months of 2025, according to Schmidt. This figure is well below expectations, with China's share of new EVs in Europe plummeting from 50 to 30 percent after the introduction of EU tariffs.
In response, some manufacturers are switching to hybrid models, which bypass tariffs. BYD projects hybrids to constitute around half of its EU exports. Meanwhile, China is hoping to defuse trade tensions through diplomatic talks with Brussels.
Mercedes CEO Ola Källenius is optimistic about the competition from any direction, expressing hope for a "fair and intelligent solution."
Some manufacturers are responding with flexibility. Zeekr, supported by Geely, downplays tariffs. "In some countries, tariffs are excessive, but that's fair for everyone. That's not a problem," said Zeekr Vice President Mars Chen.
BYD is starting production in Hungary and aims to increase EU exports from 15 to 20 percent. However, Leapmotor suffered a setback: Stellantis abruptly halted production of the T03 electric model in Poland. No justified explanation was given.
Chinese automaker, Nio, faces numerous challenges as well. The rollout of the new Firefly model has been delayed, dealer expansion in Europe is progressing slowly, and the direct sales model had to be abandoned due to poor sales. In a conversation at Shanghai Auto Show, CEO William Li said, "In China, it's possible to open 100 showrooms in a single month, but replicating that pace in Europe is a far greater challenge, as costs far exceed our estimates."
Insights:
- Chinese EV manufacturers face challenges such as tariffs, operational costs, and market adaptation issues in Europe.
- Some companies are leaning toward hybrid vehicles to circumvent tariffs and minimizing logistical complexities.
- Diplomatic negotiations between China and Brussels have become increasingly important to resolve trade tensions.
- European markets prioritize brand heritage and localized features, posing credibility challenges for new Chinese entrants.
- "What about bypassing tariffs through the production of hybrid vehicles, as BYD plans to do with half of its EU exports?"
- "Zhu Jiangming of Leapmotor admitted that the combined effects of the 30.7 percent tariff and 10 percent shipping costs have significantly impacted their competitive edge in Europe."
- "While Stellantis halted production of the T03 electric model in Poland, BYD is setting up production in Hungary to boost EU exports."
- "In the face of tariffs and operational costs, Zeekr Vice President Mars Chen was nonchalant, stating, 'That's fair for everyone. That's not a problem.'"
- "Despite the challenges, Chinese EV manufacturers continue to invest in cutting-edge technology to remain competitive in the automotive industry."
- "Feeling the pinch of rising energy costs associated with transportation, some Chinese EV manufacturers are focusing on energy-efficient designs to reduce expenses."
- "European real-estate market stability and local consumer preferences could pose hurdles for Chinese automakers seeking to grow their retail presence."
- "The push of Chinese EV manufacturers into Europe could potentially reshape the landscape of the automotive business by creating new opportunities and fostering increased investing in the energy sector.
