SHANGHAI (Reuters) – Automakers in China are ramping up exports of hybrid vehicles to Europe and planning more models for the key market, exposing the limits of the European Union’s electric vehicle tariff scheme.
The bloc’s latest EV tariffs to protect its auto industry from a flood of cheap Chinese imports do not apply to hybrid cars. That could see major brands such as China’s top EV maker BYD continue expansion in the region, analysts say.
Some manufacturers are also shifting production and assembly to Europe to lower the cost around tariffs.
“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,” said Murtuza Ali, an analyst at Counterpoint Research.
He expects China’s hybrid exports to Europe to grow 20% this year and even faster next year.
EU tariffs of up to 45.3% on Chinese EV imports came into effect in late October to counter what the European Commission says are unfair subsidies that helped create spare production capacity of 3 million EVs per year in China, twice the size of the EU market.
The anti-subsidy investigations on Chinese EV imports, which began in October 2023, and slowing car sales in China from an economic slowdown, have led some automakers to change their European strategy to focus more on hybrid exports, the data shows.
Hybrid cars, which run on a combination of gasoline and electricity, are gaining in popularity as buyers consider them an affordable compromise between all-combustion and all-electric.
From July to October, hybrid exports to Europe more than tripled to 65,800 units from 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.
That helped exports of plug-in hybrids and conventional hybrids account for 18% of China’s total vehicle sales to Europe in the third quarter, doubling from 9% in the first quarter. The proportion of EV shipments, however, fell to 58% from 62% during the same period.
The trend is likely to gain further momentum.
China, which overtook Japan as the world’s biggest auto exporter last year aided by its dominance in EVs, is stepping up its export drive to address overcapacity at home, analysts say.
Given 100% tariffs on Chinese-made EVs in the United States and Canada, Europe is also one of the most obvious outlets for Chinese auto makers.
The European Commission did not immediately reply to a request for comment on rising hybrid imports from China.