In June 2026, the European Commission plans to impose countervailing duties on Chinese-made plug-in hybrid electric vehicles (PHEVs). Preparatory work has been completed and implementation awaits approval by a majority of EU member states. This move is widely seen as a response to the rapid growth in sales of Chinese PHEVs in Europe. Previously, the EU began imposing five-year countervailing duties on Chinese battery electric vehicles (BEVs) starting in October 2024, adding differentiated tariffs on top of the standard 10% duty: BYD at 17.0%, Geely at 18.8%, SAIC Motor at 35.3%, and other cooperating companies such as NIO and XPeng at 20.7%. For certain models, the combined tariff rate reached as high as 45.3%. In April 2025, China and the EU initiated price undertaking negotiations, reaching a framework agreement in January 2026 that would allow qualified Chinese BEV manufacturers to replace countervailing duties with a minimum import price mechanism. However, as of June 2026, this mechanism has not yet been formally implemented. Against this backdrop, Chinese automakers have adjusted their export strategies, significantly increasing shipments of PHEVs—currently not subject to tariffs. Data shows that in Q1 2026, total Chinese vehicle exports to Europe reached 438,400 units, up 84.7% year-on-year. Of these, BEV exports totaled 198,300 units (+94.6%) and PHEV exports reached 106,000 units (+152.4%). By April 2026, Chinese brands held a record-high 9.8% share of the overall European automotive market, with BEVs accounting for 15.2% and PHEVs approaching 29%. Meanwhile, the EU is erecting broader institutional barriers. The proposed Industrial Accelerator Act (IAA), unveiled in March 2026, would subject global manufacturing projects in critical sectors—with over 40% of global capacity and investments exceeding €100 million—to stringent scrutiny. To gain approval, companies must meet at least four out of six criteria, including a mandatory requirement that at least 50% of employees be locally hired. The proposal also stipulates that EVs participating in EU public procurement must be assembled within the EU and contain at least 70% locally sourced non-battery components. Although China is not explicitly named, Chinese firms account for more than 40% of global production capacity in all four strategic sectors covered by the act, including batteries and EVs. The legislation still requires approval from the European Parliament and Council. Faced with escalating trade and investment barriers, Chinese automakers are accelerating local production in Europe. Chery has partnered with Spain’s Ebro Group to restart the former Nissan plant in Barcelona, with production expected to begin by late 2026 or early 2027. It is also in talks with Nissan about contract manufacturing at the Sunderland plant in the UK. SAIC Motor’s MG brand is building its own factory in Spain, with an initial investment of €200 million and an annual capacity of 120,000 vehicles, slated to start production in 2028. Leapmotor will begin mass-producing its B10 model in October 2026 at Stellantis’ Zaragoza plant. Geely, Dongfeng, XPeng, and others are also establishing footprints across Spain, France, and Austria through acquisitions or contract manufacturing arrangements. Announced Chinese EV production plans in Europe are projected to deliver a combined annual capacity exceeding 2 million vehicles. This trend is facilitated by widespread overcapacity among European auto plants, which operate at an average utilization rate of only about 55%—well below the 80% breakeven threshold. Major automakers like Stellantis and Volkswagen have significant idle capacity, with several plants having closed in recent years. In Q1 2026, Chery exported nearly 110,000 vehicles to Europe (+228.4%), SAIC shipped 96,300 units (+36.2%), BYD exported 67,900 units, and Leapmotor sent 25,100 units (+400%). Chinese brands are no longer relying solely on low-price strategies; BYD has launched its premium sub-brand Denza, while Chery has entered the top ten best-selling brands in Spain’s private retail channel. Analysts note that Chinese automakers are shifting from simple vehicle exports toward a systematic overseas expansion model—“selecting the right segment first, refining products next, and localizing production last”—rapidly transitioning from “outsiders” to “established participants” in the European market.