China carmakers pivot to hybrid models for Europe to sidestep tariffs

SHANGHAI - Carmakers 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 (EV) tariff scheme.

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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 (original equipment manufacturers) shifting towards PHEVs (plug-in hybrids) as a way to sidestep the new EU tariffs on BEV (battery-powered EV) imports from China," said Mr Murtuza Ali, an analyst at Counterpoint Research.

He expects China's hybrid exports to Europe to grow 20 per cent in 2024, and at an even faster pace in 2025.

EU tariffs of up to 45.3 per cent 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 three 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 carmakers to change their European strategy to focus more on hybrid exports, the data shows.