Chinese OEMs are seeking to realign their sales strategy in Europe to best reflect the regulatory landscape of the region. In October 2024, the EU implemented tariffs on Chinese battery electric vehicle (BEV) imports into the bloc following a nine-month-long investigation into Chinese government subsidies and a five-month-long provisional period. These tariffs, ranging from an additional 7.8% to 35.3%, are set to remain in place for the remainder of the EU’s current parliamentary term until 2029. Subsequently, Chinese OEMs have reacted to reduce the impact of tariffs. 

How have Chinese players changed EV strategies? 

At the time the anti-subsidy investigation began, BEVs were the main focus of Chinese OEMs selling in Europe. SAIC was the only Chinese player selling notable quantities of plug-in hybrid electric vehicles (PHEVs). As such, Chinese-made BEVs were seen as the main threat to the EU’s EV industry.

Although Chinese EV OEMs have strong margins on vehicles they make, the tariffs have eroded this. It was only a matter of time before Chinese OEMs looked to change their sales strategy to improve their margins in the EU. Multiple OEMs have now shifted their sales strategy to offer non-BEV models that are not subject to additional countervailing duties.

How much can an automaker save selling a PHEV?

Looking at BYD, it is subject to an additional 17% countervailing tariff on top of the baseline 10% automotive tariff. In Germany, the price of BYD’s bestselling BEV in the EU, the Atto 3, currently sits at EUR37,990. Considering the total 27% tariff, BYD pays EUR10,257 in duties. On the other hand, its bestselling PHEV, the Seal U, retails at EUR39,990 in Germany, meaning the company pays EUR3,999 in duties. Non-BEV models now offer the highest returns.

Will Chinese PHEV sales overtake their BEV sales?

For BYD and SAIC, PHEV sales are on a trajectory to overtake BEV sales this year. In March, 41% of BYD’s EV sales in the EU were PHEVs, while for SAIC this was 49%. For Chery, although it has a lower sales base, PHEVs have already overtaken BEVs with 71% of the EVs it sold in March being PHEVs. As sales continue to evolve throughout this year the extent to which Chinese OEMs have changed their sales strategy will become clear. For now, the lack of tariffs on PHEVs is an opportunity multiple Chinese OEMs are taking advantage of.

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