Chinese electric vehicle giant BYD is contemplating the establishment of its third assembly plant for new energy vehicles (NEVs) in Germany. This consideration was reported on March 17, 2025, by Reuters, citing sources familiar with the matter. The decision is part of BYD's strategy to increase brand recognition and acceptance among European customers, drawing attention to the challenges posed by labor costs and existing tariffs.
Currently, BYD is actively constructing two NEV plants in Europe: one located in Hungary and the other in Turkey. Executive Vice President Stella Li mentioned earlier this month during an interview with Automobilwoche, "We are considering building a third plant to serve the European market." This marks BYD's continued investment and expansion efforts within the region as it prepares to tap the thriving European automotive market.
Germany, renowned as both the largest economy and car market within Europe, stands out as BYD's top choice for the new facility. Yet, this intention faces internal deliberations restrained by the country’s high labor costs, costly energy, and varying levels of productivity and flexibility. Despite these challenges, Germany's establishment appears attractive for BYD, allowing the company to strengthen local manufacturing efforts.
By locating production directly within Europe, BYD also seeks to combat the adverse effect of recent import tariffs imposed by the EU on China-made electric vehicles. The European Commission declared on October 29, 2024, the conclusion of its anti-subsidy investigation pertaining to battery electric vehicles from China, paving the way for increased tariff rates on imports. For BYD, this translates to facing additional tariffs of 17% on top of the original 10% for electric vehicles, complicative factors for market entry.
The Chinese automobile sector is increasingly eager to establish manufacturing footholds across Europe, particularly as demand slows within China, the world’s largest car market. BYD and other Chinese automakers are intent on selling lower-cost vehicles to navigate competitive landscapes and leverage efficiency. Several reports suggest these companies are evaluating potential mergers and acquisitions, with discussions surrounding factories at risk of closing, particularly those owned by Volkswagen.
The recent dynamics within EU member states exhibit significant divergence on the issue of tariffs. During early October voting, Germany and several other nations—including Hungary, Malta, Slovakia, and Slovenia—voted against these tariff measures. On the other hand, countries like Bulgaria, Denmark, Estonia, France, and Italy showed support for imposing additional tariffs, highlighting the political complexity surrounding international trade agreements and manufacturing operations.
Parent company BYD's sales performance will significantly influence the viability of its planned third facility. Analysts project substantial growth for the company, with European sales anticipated to double this year, reaching around 186,000 units—a significant increase from 83,000 units sold in 2024. Projections suggest sales could surge close to 400,000 units by 2029 as both the Hungarian plant, set to begin production in October 2025, and the Turkish facility, expected to launch operations by March 2026, become fully operational.
Notably, BYD's facilities plan to operate with combined yearly capacities totaling 500,000 vehicles. This ambitious strategy underlines BYD’s overarching goal of not only establishing local manufacturing presence but also circumventing the ramifications of stringent EU tariffs. The company is adhering to directives from the Chinese government, which discourages investments directed toward nations enforcing tariffs against Chinese exports. Consequently, Italy and France rise as candidates being discounted by BYD, as the firm strategically navigates its expansion efforts across the continent.
The German government is undergoing significant changes, with new leadership likely to support the automotive sector more assertively and encourage foreign investment. The Christian Democratic party, anticipated to reform the government, has pledged tax reductions to promote growth for the car manufacturing industry, traditionally the largest sector of revenue for the country. Nonetheless, it has expressed clear opposition to subsidies, showing the tensions inherent within competitive automotive economics.
BYD's international strategy highlights the transformative potential of electric vehicles and the shifting dynamics within the nature of automobile production. Though challenged by external factors such as tariffs and labor costs, BYD remains committed to its expansion intentions, reflecting increasing global interest and participation within the electric vehicle sector.
The continued advancements and decisions around the plant will mark significant developments not only for BYD but also for the broader automotive market, as European consumers increasingly embrace new energy vehicles amid environmental transitions and changing consumer preferences.