EU tariffs are bringing electric car production to Europe

Battery-electric vehicles manufactured in China accounted for 17 per cent of the EU market in the first quarter of 2026. In 2024, when the European Union introduced additional tariffs, their share had temporarily reached 22 per cent.

According to an analysis by European clean transport campaign group Transport & Environment (T&E), the decline primarily reflects production shifts by Western manufacturers. Tesla, BMW and Volvo now manufacture a larger proportion of the electric cars intended for European customers within the EU. The findings indicate that the trade measures are supporting localisation while opening up further potential for regional production and value creation.

How have the tariffs changed import patterns?

The share of China-built BEVs imported by European manufacturers fell from 38 per cent in 2024 to 23 per cent in the first quarter of 2026. Tesla’s corresponding share declined from 26 to 19 per cent. Chinese OEMs now account for more than half of all battery-electric cars imported from China. The figures show that European production is gaining relevance. At the same time, Chinese manufacturers are gaining ground across the European automotive market, underlining the continuing intensity of competition.

The impact of the trade measures varies considerably by manufacturer because the additional tariff rate differs between companies. SAIC faces a duty of around 35 per cent, and its battery-electric vehicle imports almost halved between 2023 and 2025. BYD is subject to an additional rate of around 17 per cent and more than doubled its BEV imports into the EU over the same period. Price remains a decisive factor. According to the analysis, battery-electric models from Chinese brands still cost 21 per cent less on average than comparable vehicles from European manufacturers. This price difference limits how strongly tariffs alone can influence sales and reinforces the importance of competitive local production.

Why are Chinese manufacturers moving production to Europe?

Since the European Commission announced its anti-subsidy investigation in September 2023, ten Chinese vehicle production projects have been announced in Europe, according to T&E. Manufacturing within the EU allows carmakers to avoid the additional duties applied to battery-electric vehicles imported directly from China. These projects could expand Europe’s industrial base, particularly where final assembly is accompanied by local engineering, component manufacturing and supplier investment. T&E nevertheless warns that Europe could become primarily a location for assembling imported components unless a more comprehensive regional supply chain develops.

Chinese manufacturers are also adapting their product portfolios. Plug-in hybrids are not covered by the additional duties on China-built BEVs. The market share of Chinese brands in Europe’s plug-in hybrid segment rose from 3 per cent in 2024 to 13 per cent in 2026. This development illustrates the speed and scale of Chinese automotive expansion, as manufacturers redirect products and investment towards less restricted areas of the market.

Where does battery production offer further potential?

While electric cars face additional trade measures, batteries imported from China are subject to comparatively low tariffs. According to T&E, Chinese battery imports into the EU increased sevenfold between 2020 and 2025. Less than a quarter of the batteries manufactured within the European Union are produced by European companies. This leaves considerable scope to increase regional participation in one of the most valuable parts of the electric powertrain.

T&E therefore proposes extending trade-defence measures to batteries. The organisation estimates that a 20 per cent tariff on Chinese batteries would increase the average price of an electric car manufactured in the EU by around 2.8 per cent. Trade measures would address only part of the challenge. Europe also needs to industrialise battery production at greater speed and scale to translate investment into competitive manufacturing capacity and increase the proportion of value retained within the region.

How could CO₂ targets support European production?

Trade policy is only one factor shaping Europe’s electric vehicle market. Fleet CO₂ targets determine how quickly manufacturers must increase the proportion of zero-emission vehicles they sell. They therefore influence investment decisions concerning vehicles, batteries and manufacturing facilities. T&E examined a proposal by Member of the European Parliament Massimiliano Salini that would weaken the planned targets. 

According to the organisation’s calculations, the market share of Chinese electric car brands could reach 30 per cent by 2035 if the proposed changes were implemented. Under the European Commission’s proposal, T&E expects Chinese brands to account for around 15 per cent of the market. The organisation argues that stronger CO₂ targets would increase demand for electric cars while supporting investment in European production.

What further measures does T&E propose?

T&E assesses the existing tariffs as partially effective. They have encouraged Western manufacturers to move production and prompted Chinese companies to establish manufacturing capacity in Europe. However, the continued growth of Chinese brands and battery imports highlights the limits of the current measures. The organisation is therefore calling for higher tariffs on batteries from China. It also wants measures to prevent companies from circumventing duties by shifting production to countries outside the EU. 

In addition, T&E supports implementing the planned EU Industrial Accelerator Act and introducing European rules for corporate fleets. Both initiatives are intended to increase demand for electric cars and batteries manufactured in Europe. The organisation also argues that the passenger-car CO₂ targets for 2030 and 2035 should be maintained. In its assessment, these requirements will determine how quickly Europe’s electric vehicle market grows and how much demand emerges for locally produced vehicles, batteries and components.

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Munich on 21-22 October, 2026