Investing.com — Europe’s embrace of Chinese EVs is fueling speculation over when those brands will challenge the U.S., according to analysts.
At this year’s IAA Mobility show, “over a dozen Chinese car brands and, by our count, over 50 Chinese models had a presence,” UBS analysts said.
Their footprint in Europe is growing fast, with JATO data showing that Chinese brands captured 5.1% of new car registrations in the first half of 2025, nearly double from a year earlier.
Another 2.9% came from Chinese-owned brands, much of it focused on battery-electric and plug-in hybrid vehicles.
BYD (HK:1211), for example, now offers 13 models in Europe, up from six just two years ago, and plans to operate more than 1,000 stores across 32 countries by year-end. It aims to produce all of its European EVs locally by 2028, starting with its Surf model from a Hungarian plant.
Other brands are following similar paths. Hongqi is targeting 15 model launches in Europe by 2028, while Xpeng (NYSE:XPEV) has entered 10 European markets and is opening an R&D center in Germany.
“Everything we do starts with the needs of European users,” said an executive at GAC Group, another Chinese carmaker, and highlighted “accelerating steps towards localized production.”
The competitive dynamic in Europe has important implications for U.S. automakers and suppliers. Analysts warn this could echo what happened in China, where global suppliers underperformed as customers lost share to domestic players.
European incumbents like Volkswagen (ETR:VOWG), Stellantis (BIT:STLAM), and Renault (EPA:RENA) could face pressure if Chinese brands succeed, while suppliers such as Mobileye Global (NASDAQ:MBLY), BorgWarner Inc (NYSE:BWA), Magna (NYSE:MGA), Lear Corporation (NYSE:LEA), and Adient (NYSE:ADNT) all have significant exposure to Europe.
For now, U.S. policy provides more insulation. UBS points out that the American market is “effectively closed,” helping protect Detroit’s automakers and their suppliers.
Still, U.S. executives are watching closely. Ford Motor (NYSE:F) CEO Jim Farley has praised the Xiaomi SU7, remarking that “we see the Chinese, companies like Geely (HK:0175) and BYD” as the real competitors for the next generation of EVs.
Rivian (NASDAQ:RIVN) CEO RJ Scaringe was even more blunt, saying Chinese “cars are actually better” and that the industry should prepare for their eventual arrival.
Mexico’s recent move to impose a 50% tariff on Chinese vehicle imports adds another layer of complexity.
While the measure is seen as protecting local production and aligning with U.S. preferences ahead of USMCA renegotiations, it could encourage Chinese firms to build plants in Mexico. That, analysts warned, could raise the risk of a “back door” entry into the U.S. market.
“Separately, we note that as it stands, a 50% tariff from China into Mexico could impact GM (NYSE:GM) who we believe imports ~125k units, though we do wonder if there could be exemptions for GM,” the analysts added.
But at the same time, the analysts view this “as an opportunity for GM to “backfill” some of their Mexican footprint that may come available as they resource some production to the U.S.”
In sum, while Chinese EVs may not flood U.S. showrooms soon, “better product, particularly if it’s cheaper, tends to find a way into the market,” the analysts stressed.
U.S. policy shields the domestic market for now, offering protection to local automakers, as well as suppliers tied closely to the Detroit Three and truck production, though how long that insulation lasts remains a question.
Related articles
Is Europe a harbinger for the U.S. on China EVs?
8 Warren Buffett-Backed Stocks to Navigate September Volatility
EUR/USD Could Rebound as Bond-Driven US Dollar Strength Looks Overdone