Chinese Electric Vehicles Challenge German Automakers
The German automotive industry, a major pillar of Germany’s economy, is experiencing growing pressure. For years, German automakers such as Volkswagen, BMW and Mercedes-Benz have built strong reputations for quality, safety and luxury. Brands within the Volkswagen Group, including Audi and Porsche, have also helped make German car logos become prestigious. In recent years, however, weak economic growth, inflation and geopolitical tensions have strained the German automotive industry. Additionally, the industry is facing a competitive threat from Chinese electric-vehicle manufacturers, raising the question: Can Germany maintain its long-standing position in the global automotive market?
Chinese electric-vehicle manufacturers, including BYD, have expanded their presence in the EU, causing greater competition for well-established European automakers. In 2024, BYD’s global sales of new energy vehicles reached 4.27 million units, a 41% increase from the previous year. BYD entered the European passenger car market in 2022 and later announced plans to build an automobile factory in Hungary. The rise of Chinese electric-vehicle manufacturers has raised concerns that European countries may face a new version of the China shock.
Economists originally used the term China shock to describe the rapid growth of Chinese import competition during the 1990s and 2000s. China joined the World Trade Organization in December 2001, becoming more integrated into global trade. Economic research found that increased exposure to Chinese imports had lasting effects on manufacturing employment in heavily exposed American communities.
Concerns about a similar pattern have now emerged in Europe’s automotive industry. After an investigation, the European Commission concluded in 2024 that China’s battery electric vehicle industry benefited from unfair subsidies, threatening economic harm to European manufacturers. In response, the EU imposed additional tariffs on battery electric vehicles imported from China to counteract the advantage created by those subsidies.
However, the tariffs apply specifically to battery electric vehicles imported from China. BYD is building its first European passenger car factory in Szeged, Hungary. Vehicles manufactured at the factory would be produced within the European Union rather than imported from China. According to BYD, the factory is expected to create thousands of local jobs and support local supply chains.
Chinese competition is only one of several challenges facing European automakers. The European Commission’s 2025 automotive action plan highlighted growing international competition, rapid technological change, global supply chain risks and geopolitical uncertainty as major pressures on the industry. It also warned that European companies risk falling behind overseas competitors in key areas such as batteries, vehicle software and autonomous driving technology.
The European Union is responding through both tariffs and policies intended to strengthen innovation and manufacturing within Europe. Nevertheless, the growing presence of Chinese electric vehicle manufacturers shows that tariffs alone will not shield European automakers from international competition. For German automakers, the challenge extends beyond producing more electric vehicles. They will most likely need to offer competitive prices, strengthen their battery and software capabilities and respond quickly to changing consumer preferences. Their established reputations for quality and engineering remain important advantages, but reputation alone may not guarantee success as the global automotive market shifts toward electric vehicles. Whether German automakers can maintain their long-standing position will depend on how effectively they respond to technological advances and intensifying global competition.
Hadassa Rosenberg contributed to this article
Photo Caption: BYD electric vehicles displayed at their headquarters in Shenzhen, China
Photo Credit: iMoD Official/Wikimedia Commons
