EU tariffs of up to 45.3% have not stopped Chinese players surging past Japan, as thin electrified lineups lock the latter out of subsidies. By Stewart Burnett

Chinese automakers outsold Japanese brands in Europe’s passenger car market for the first time in May, according to data from the European Automobile Manufacturers’ Association (ACEA). Sales by five Chinese brands—BYD, SAIC, Geely, Chery and Leapmotor, respectively—rose 65% year-on-year to 138,410 units across 31 European countries, against a combined 130,424 units for Toyota, Honda, Nissan, Suzuki, Mazda and Mitsubishi, which were collectively down 3%.

The reversal follows a steadier climb than can be indicated by a single month’s volumes. SAIC has posted year-on-year sales growth in 17 of the past 24 months, while BYD, which was only added to ACEA’s tracking in July 2025, managed 11 consecutive months of sales growth—in other words, every single month that it has been tracked. Nissan, by contrast, grew in just two of those months, with Suzuki on five and Mazda on seven.

While virtually all Chinese automakers save perhaps Nio and Great Wall are doing well in Europe, it is BYD that is providing much of the sales momentum. Its total overseas passenger vehicle sales grew 70% Y.o.Y to 789,367 units in the first half of 2026, with Chairman Wang Chuanfu telling shareholders in June that full-year overseas sales are expected to reach 1.6m vehicles, more than 50% above 2025’s total. The automaker had revised its international sales volumes target upwards from 1.3 million units to 1.5 million earlier in the year. Its overseas push coincides with a 16% decline in BYD’s domestic new-car sales for the same period, its first H1 drop in six years.

The EU’s tariffs on Chinese-made battery-electric vehicles (BEVs), which can add up to 45.3% in costs for state-owned players, have done little to blunt that cost advantage. BYD’s Dolphin Surf Boost is priced in Europe from €26,990 (US$30,800), still 3% cheaper than the comparable Renault 5 E-Tech. Cognisant of European market trends, the automaker is increasingly leaning on plug-in hybrids (PHEVs), which escape the additional tariff altogether and saw May sales grow 140% year-on-year.

BYD has driven a large portion of the sales momentum for Chinese automakers

Renewed subsidy programmes have sharpened the divide. Germany’s new incentive, worth up to €6,000 for BEVs and PHEVs, replaces one scrapped in December 2023, while Sweden and Italy have expanded their own support. Japanese brands, strong on fuel efficiency and thin on either BEVs or PHEVs—albeit decent on regular hybrids—are largely unable to benefit from these incentives. Indeed, there are few reasons for EU consumers to opt for a Japanese vehicle right now given sales momentum is tilted heavily in favour of electrified vehicles: during Q1 2026, total electrified vehicle market share sat at 67.5%, with BEVs accounting for 19.5% of all new sales.

Europe is also slipping down Japan’s list of priorities. Nissan’s long-term plan, announced in April, named Japan, the US and China as priority markets with little mention of Europe, a shift that tracks with Chinese automakers’ growing interest in building locally to sidestep tariffs altogether. With that said, the EU saw the strongest Japanese export growth of any market during the first five months of 2026: 185,920 units, up 25% Y.o.Y. 

Ultimately, exports will give way to local production as regulatory pressure ramps up on global automakers, Chinese or otherwise. To this end, Leapmotor is set to assemble SUVs at a Stellantis plant in Spain, Chery opened a European headquarters in Barcelona in April, and Nissan is consolidating two production lines at its underused Sunderland plant, reportedly in talks with Chery to hand over the freed capacity. BYD, for its part, appears likely to acquire a brownfield site in Southern Europe from Stellantis in the coming weeks.