Chinese car manufacturers are not just selling EVs in Europe anymore. They are building them here. Right now, in 2026, factories in Hungary, Austria and Spain are already assembling Chinese electric cars for European buyers. And the reason this is happening comes down to one decision Brussels probably did not anticipate when it introduced tariffs on Chinese EVs back in 2024.
Once a car is built inside the EU, those tariffs simply do not apply. A BYD assembled in Hungary is treated the same as a Volkswagen assembled in Germany, which means the entire price penalty that tariffs were supposed to create disappears the moment production moves onshore.
Five Chinese manufacturers have already made this move, or are very close to doing so. Some built their own plants. Some partnered with established European manufacturers. And some chose their factory locations with a very specific eye on the politics of the tariff vote, which turns out to be one of the more interesting parts of this story.
Here is exactly what is happening, brand by brand, and what it means if you are buying an EV in Europe right now.
Table of Contents
- Why Local Production Changes Everything
- Quick Overview: Who Is Producing Where
- BYD — Hungary (Szeged)
- Xpeng — Austria (Graz, via Magna Steyr)
- GAC Aion — Austria (Graz, via Magna Steyr)
- Chery / Ebro — Spain (Barcelona)
- Leapmotor / Stellantis — Spain (Zaragoza)
- The Political Layer: Where You Build Matters
- Who Could Be Next?
- What This Means for European Buyers
- FAQ
Why Local Production Changes Everything
When the European Commission introduced additional tariffs on Chinese made EVs in October 2024, the logic was straightforward. Chinese cars were arriving in Europe with prices that European manufacturers simply could not match, and Brussels believed state subsidies back in China were a big part of why. So tariffs were introduced to level the playing field, ranging from an extra 17% for BYD up to 35.3% for SAIC, on top of the standard 10% duty that already existed. I covered the full breakdown of those rates in this detailed overview of EU tariffs on Chinese electric vehicles.
What happened next was not quite what Brussels had in mind. Rather than absorbing the cost or pulling back from Europe, Chinese manufacturers started looking at the map differently. Hungary, Austria, and Spain suddenly became very attractive places to put a factory. And once production moves there, the tariff conversation becomes largely irrelevant.
Quick Overview: Who Is Producing Where
| Manufacturer | Location | Partner | Status | First Model |
|---|---|---|---|---|
| BYD | Szeged, Hungary | — | Trial production since Jan 2026; series from Q2 2026 | Dolphin Surf |
| Xpeng | Graz, Austria | Magna Steyr | Active since September 2025 | G6, G9 |
| GAC Aion | Graz, Austria | Magna Steyr | Active since November 2025 | Aion V, Aion UT |
| Chery / Ebro | Barcelona, Spain | Ebro-EV Motors | Ebro models active since 2024; Omoda 5 planned for 2026 | Ebro S700/S800 |
| Leapmotor / Stellantis | Zaragoza, Spain | Stellantis | Production planned Q3 2026 | B10 |
BYD — Hungary (Szeged)
BYD’s factory in Szeged is by far the biggest single manufacturing commitment in this story. The total investment is reported at up to €4 billion, and the plant is designed for an eventual capacity of 300,000 vehicles per year, which puts it in the same league as a large Volkswagen facility.
When BYD first announced the Szeged plant back in early 2024, it felt like a long term ambition. Two years later, trial production has already started, and full series production is expected from Q2 2026. The first model rolling off the line is the BYD Dolphin Surf, the compact entry level electric hatchback that is already one of the most affordable EVs available in Europe. The Atto 2 follows shortly after, with the Atto 3, Dolphin, Seal and Seal U all planned for the same facility in the future.
What is interesting about BYD’s choice of Hungary is that it was not a rushed decision driven purely by tariffs. BYD has been operating in the country since 2017, first producing electric buses in Komárom, then adding battery assembly operations in Fót and Páty. In 2025, the company moved its entire European headquarters from the Netherlands to Budapest. Szeged is really just the next logical step in a very patient, long term approach to the European market.
Xpeng — Austria (Graz, via Magna Steyr)
Xpeng took a very different approach to European production, and in many ways it is the smarter short term move. Instead of building its own plant, Xpeng uses Magna Steyr’s existing facility in Graz to assemble cars for the European market. Magna Steyr is one of the world’s leading contract vehicle manufacturers, which means Xpeng gets access to world class production quality, existing certifications and a fully running factory without spending years and billions setting one up from scratch.
As I covered when it happened, Xpeng began European production of the G6 and G9 in Austria in September 2025, and both models have been coming off the Graz line since then. For European buyers, that means both models are now manufactured in Austria, avoiding the 30.8% total tariff that would otherwise apply to Xpeng vehicles imported from China.
The G6 in particular has been one of the more talked about Chinese EVs in Europe this year. If you are cross shopping in the mid size SUV space, it is worth reading how the Xpeng G6 compares to the Tesla Model Y, because the gap is smaller than many people expect. There is also the Volkswagen connection worth mentioning: VW invested €700 million in Xpeng in 2023 and the two companies announced a joint smart vehicle development programme shortly after, which gives Xpeng a level of engineering credibility in Europe that most of its Chinese competitors simply cannot replicate.
GAC Aion — Austria (Graz, via Magna Steyr)
Here is where the Magna Steyr story gets even more interesting. The same Graz facility that assembles Xpeng models is also now home to GAC Aion, making it arguably the single most important location in the entire Chinese EV localisation story in Europe.
GAC and Magna announced their production partnership in November 2025, and the GAC Aion V went straight into series production at Graz from that point. Just five months later, in March 2026, the Aion UT joined the lineup. The Aion UT is a compact electric hatchback with up to 430 km of WLTP range and 30 to 80 percent fast charging in just 24 minutes, designed specifically with European urban drivers in mind.
What stands out about GAC’s European approach is how thorough it is beyond just the assembly plant. The Aion UT was designed at GAC’s European design centre in Milan. European headquarters are based in the Netherlands. Roadside assistance across Europe is handled through a partnership with Allianz. This does not look like a company that is simply dipping its toes in the water.
Chery / Ebro — Spain (Barcelona)
Chery’s story in Spain is slightly different from the others because it comes with a genuinely interesting piece of automotive history attached to it. Ebro was a Spanish vehicle brand that disappeared back in 1987, and the joint venture between Chery and Spanish company Ebro-EV Motors has brought it back to life at the former Nissan plant in Barcelona’s Zona Franca industrial area.
Production of the first models, the Ebro S700 and S800, began in late 2024. Both are plug in hybrid SUVs built on Chery’s existing Tiggo 7 Pro and Tiggo 8 Pro platforms, sold under the revived Ebro name. Chery claims this makes it the first Chinese automaker to produce vehicles in Western Europe.
The next phase is Chery branded production at the same site. The Omoda 5, in both electric and combustion engine versions, is planned for 2026, with the Jaecoo 7 to follow. The factory is targeting 50,000 vehicles per year by 2027 and 150,000 units annually by 2029. And there is an export angle too: Chery is planning to use Barcelona as a shipping hub for Latin America, which makes the location even more strategically useful.
Leapmotor / Stellantis — Spain (Zaragoza)
Leapmotor’s European production story has had more turns than most, and the reason why tells you a lot about how political this whole situation has become.
Stellantis acquired a 21% stake in Leapmotor in 2023 for €1.5 billion, and the two companies set up Leapmotor International, a joint venture with Stellantis holding 51% and Leapmotor holding 49%, to handle all manufacturing and distribution outside China. The first European production site was a Stellantis plant in Tychy, Poland, where the compact Leapmotor T03 started rolling off the line from June 2024.
That production ended abruptly in March 2025, with no detailed explanation from either side. But the timing made the reason fairly obvious. Poland had voted in favour of EU tariffs on Chinese EVs. Shortly after that vote, China instructed its automakers to pause major investments in countries that had supported those tariffs. The Tychy plant quietly became a casualty of that pressure, and Leapmotor’s Polish chapter closed without ceremony.
The replacement is Stellantis’s facility in Zaragoza, Spain, a country that abstained from the tariff vote and which also happens to be close to a planned CATL battery factory. Production of the Leapmotor B10 compact SUV is targeted for Q3 2026. The B10 is a car I rated as the best buy SUV EV you can get right now in Europe, so having it manufactured locally rather than imported from China is a significant development for anyone considering one. The B05 hatchback follows after that, and it already featured in my top 10 electric hatchbacks for 2026 for good reason. There are also reports that an Opel badged version of the B10 is in development, which would make it the first Chinese designed vehicle sold under a mainstream European brand.
The Political Layer: Where You Build Matters
The Leapmotor situation is the most visible example of something that runs quietly through all of these stories. The choice of where to build is not just an industrial decision, it is a geopolitical one.
Countries that voted for EU tariffs on Chinese EVs have, not coincidentally, seen very little Chinese automotive investment flow their way. Countries that abstained or stayed neutral have attracted billions. That is not a coincidence, and it is not subtle either.
Hungary is the clearest case. The government there has maintained unusually close ties with Beijing by EU standards, and the country has effectively become the default hub for Chinese automotive investment in Central Europe. BYD chose Szeged, and CATL is building a major battery factory in the region. Together, these investments are creating something that looks a lot like a Chinese EV industrial cluster sitting inside the EU’s eastern border.
Spain’s position is different but equally deliberate. National and regional governments there actively went after Chinese automotive investment, and it has paid off in a fairly significant way. Barcelona has Chery and Ebro. Zaragoza has Leapmotor and Stellantis. And there are credible reports that BYD is now considering Spain as the location for a third European manufacturing site.
Austria, with Magna Steyr, sits in a category of its own. Politically neutral in the tariff debate, industrially world class, and already running. Xpeng and GAC Aion are not there because of political calculation, they are there because Magna offers something no new greenfield factory can match: an existing production line that works, today.
Who Could Be Next?
Five manufacturers is already a significant shift, but there are signs that the list is about to get longer.
Geely is the most notable name on the horizon. According to a recent report I covered, Geely is reportedly in the process of acquiring a former Ford facility in Spain, which would give the group, which already owns Volvo, Polestar, Zeekr and Lynk and Co, its own production footprint in Europe under its own brand. If that goes ahead, Spain will have become the undisputed centre of Chinese EV manufacturing in Western Europe.
And Chery, which already produces in Barcelona, appears to be looking even further north. Talks are reportedly underway between Nissan and Chery over a potential production partnership at Nissan’s plant in Sunderland, in the UK. Nothing is confirmed yet, but the logic is clear: Sunderland is an established EV production site with skilled workers, and Nissan has spare capacity it needs to fill.
What This Means for European Buyers
The practical consequences of all this are significant, and most of them will become more visible over the next year or two.
The most obvious one is pricing. Models produced in Europe avoid tariff surcharges, which creates structural downward pressure on prices over time. Whether manufacturers pass those savings straight to buyers or use them to improve margins depends on how competitive each segment gets. But the direction of travel is clear.
There is also the question of origin. Cars assembled in Austria, Hungary or Spain carry a Made in Europe label, which matters for some buyers directly and for a growing number of company car policies that specify EU origin requirements. That is already the case for the Xpeng G6 and G9, the GAC Aion V and UT, and the Ebro S700 and S800. It will apply to BYD models from Hungary and Leapmotor models from Zaragoza before the end of 2026.
And then there is the bigger picture. One of the EU’s stated goals in introducing tariffs was to buy European manufacturers time to become more competitive in the EV segment. Local production by Chinese brands does not slow that competition down. If anything, it removes one of the last structural disadvantages Chinese brands were operating with, and makes the competitive environment even more intense for European OEMs going forward.
FAQ
Which Chinese car manufacturers are currently producing vehicles in Europe?
As of mid 2026, five Chinese manufacturers have active or imminent European production: BYD in Hungary, Xpeng and GAC Aion at Magna Steyr in Austria, Chery through its joint venture with Ebro in Barcelona, and Leapmotor through its joint venture with Stellantis in Zaragoza.
Where is BYD building its European factory?
BYD is building its European passenger car factory in Szeged, Hungary. Trial production started in January 2026 and full series production is expected from Q2 2026. The first model to be assembled there is the BYD Dolphin Surf. The plant is designed for an eventual capacity of up to 300,000 vehicles per year.
Why are Chinese carmakers building factories in Europe?
The EU introduced additional tariffs on Chinese made electric vehicles in October 2024, ranging from 17% to 35.3% on top of the existing 10% standard duty. By manufacturing inside the EU, or in countries with preferential trade arrangements, Chinese automakers avoid these tariffs entirely, which makes a significant difference to their pricing and competitiveness.
What is Magna Steyr and why are two Chinese brands using it?
Magna Steyr is a contract vehicle manufacturer in Graz, Austria, operated by Canadian automotive supplier Magna International. It is one of the world’s most capable facilities for lower volume production runs, and it allows brands like Xpeng and GAC Aion to manufacture in Europe without the time and capital cost of building their own plants. Xpeng began production there in September 2025 and GAC Aion followed in November 2025.
Why did Leapmotor stop production in Poland and move to Spain?
Leapmotor’s T03 was assembled at a Stellantis plant in Tychy, Poland from June 2024 until March 2025. Production ended after Poland voted in favour of EU tariffs on Chinese EVs, following which China instructed its automakers to limit major investments in countries that had supported those tariffs. Stellantis and Leapmotor subsequently chose Zaragoza in Spain, which had abstained from the tariff vote, as the new production location. The Leapmotor B10 is expected to begin production there in Q3 2026.
Will Chinese EVs produced in Europe be cheaper to buy?
Not necessarily right away, but the removal of tariff costs creates the conditions for lower prices over time. Whether manufacturers pass those savings to buyers or retain them as improved margins will vary by brand and market. The broader pressure on pricing is downward, which is good news for anyone shopping for an EV in Europe.
Could Geely also start producing in Europe?
Geely is reportedly in talks to acquire a former Ford facility in Spain, which would give the group its own European manufacturing base. Nothing has been officially confirmed yet, but if it goes ahead, it would make Spain the undisputed centre of Chinese EV production in Western Europe.
Is Chery planning to produce cars in the UK?
There are reports of talks between Nissan and Chery about a potential production partnership at Nissan’s Sunderland plant in the UK. Nothing is confirmed, but it would make sense logistically given that Sunderland is an established EV production site with available capacity.
Featured Image Credit: Magna
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