A wave of new tariffs from the European Union aims to slow the sale of Chinese vehicles, but new factories from some of China’s biggest manufacturers might help them break in.
Tariffs totaling up to 35% on imported electric vehicles (EVs) from China have posed a significant challenge for Chinese automakers in the EU. Designed to counteract state subsidies that give these manufacturers a competitive edge, the tariffs have already impacted market dynamics. Chinese brands like SAIC-owned MG have seen their European market share drop, with MG experiencing a steep 58% year-over-year decline in registrations this past November.
While the EU’s actions aim to level the playing field for local automakers, Chinese car manufacturers are expanding their global manufacturing footprint in a bid to circumvent the trade barriers.
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MG’s Egyptian expansion
SAIC Motor, the Chinese owner of the MG brand, recently announced a $135 million investment in a new manufacturing facility in Egypt. Scheduled to begin production in 2026, the plant will initially produce 50,000 vehicles annually, with plans to scale up to 100,000 units. Located in Egypt’s New October City, this facility will not only serve local and regional markets but also position MG strategically close to Europe.
The factory’s first product will be the facelifted MG5, with plans to produce a range of SUVs and new-energy vehicles over time. By establishing a manufacturing base outside China, MG can potentially avoid the steep EU tariffs on Chinese-made vehicles, making its models more competitively priced for European consumers.
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European manufacturing on the horizon
In addition to its Egyptian plant, MG is actively exploring the construction of an EV-focused manufacturing facility within Europe, CarScoops reported. Potential sites in Spain, Hungary, and the Czech Republic are under consideration, with Spain reportedly being the frontrunner. A European factory could mitigate tariff-related challenges and solidify MG’s presence in the EV market.
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Other Chinese automakers are also pursuing similar localization strategies. China’s BYD is taking bold steps to establish a stronger presence in Europe, aligning with the broader manufacturing strategy employed by Chinese automakers. BYD will consider building a second assembly plant in Europe in 2025, according to its European managing director, Michael Shu.
This expansion builds on BYD’s earlier announcement of its first European EV manufacturing facility in Hungary, marking a significant milestone for Chinese automakers seeking to localize production within the region.
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A mixed bag for Chinese brands
Even as new tariffs take effect, not all Chinese automakers are feeling the pinch equally. BYD, for example, managed to weather the storm in the first full month since the EU’s new tariffs took effect. In November 2024, the company recorded 4,796 vehicle registrations in Europe—a 127% increase from the same period last year. Unlike MG, BYD’s tariff exposure is reportedly lower, and its models continue to appeal to both private buyers and fleet operators.
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In contrast, MG’s European presence has dropped sharply since new tariffs took effect. In November, the automaker reported a 58% decline in European registrations compared to the previous year, selling just 3,762 vehicles. The brand’s struggles underscore the importance of diversifying production and supply chains to remain competitive in the global EV market.
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The broader impact of EU tariffs
The EU’s new measures reflect a growing trend of protectionism as countries seek to safeguard local industries. Europe’s automotive sector, which employs hundreds of thousands of workers, is grappling with the costly transition from combustion engines to electric drivetrains. By imposing higher tariffs on Chinese imports, the EU aims to give domestic automakers breathing room to adapt.
The tariffs, however, have created uneven effects across Europe. While Chinese EV registrations have halved in key markets like Germany and France, the UK—no longer part of the EU—has seen a 17% increase in Chinese vehicle sales over the past year.
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Preparing for a contentious future
The stakes are high for Chinese automakers. The European market remains a critical battleground for the future of EVs, and overcoming tariff barriers will require significant investment and innovation. Establishing local manufacturing hubs, exploring partnerships, and developing tariff-friendly supply chains are essential strategies for staying competitive.
The broader EV market is also becoming less predictable. Slowing adoption rates, fluctuating consumer demand, and political pressures are forcing automakers worldwide to rethink their strategies. For Chinese brands, this means navigating protectionist policies and contending with inconsistent market demands.
Final thoughts
The EU’s tariffs have undoubtedly created hurdles for Chinese automakers, but they have also spurred a wave of strategic adaptation. Investments in facilities like MG’s Egyptian plant and BYD’s Hungary factory signal a determined effort to maintain a presence in lucrative markets.
As competition in the EV space intensifies, the ability of Chinese automakers to expand their manufacturing footprint will determine whether they can overcome these obstacles or retreat from their ambitious global expansion plans. The next few years will be critical in shaping which continents lead—and which ones take a backseat— in the automotive market.
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