Italy and Spain Lure Chinese Automakers to Bypass 45% Electric Vehicle Tariffs

Brussels charges up to 45% on Chinese electric vehicles imported into the EU (EU Access2Markets). Italy, Spain, and Hungary are simultaneously inviting the same Chinese carmakers to build factories on European soil. The tariffs were supposed to protect Europe's auto industry. They are instead fueling a continent-wide bidding war for Chinese factory investment that is redrawing the map of European manufacturing.

The Auction

Spain has at least nine Chinese automotive plants in advanced stages, with cumulative investment exceeding €15 billion. CATL's €4.1 billion battery gigafactory in Zaragoza alone will create 3,000-4,000 jobs (La Vanguardia). In Hungary, BYD's Szeged plant began trial production in January 2026, targeting 150,000 vehicles per year, with plans to double that (electrive.com).

Italy's case is the starkest. Stellantis's Cassino plant operated just 17 days out of 90 in Q1 2026, producing fewer than 3,000 cars. Italy made 380,000 vehicles in 2025, its lowest output since 1955. Industry Minister Adolfo Urso, who once fought to keep Chinese automakers out, now says openly: "Two or three Chinese car companies are thinking about investing in Italy, and they are welcome". BYD confirmed Italy is on its "short list".

The Tariff Loophole

The EU's countervailing duties (extra charges on top of the standard 10% import tariff, meant to offset Chinese state subsidies) apply to vehicles made in China. BYD pays +17%, SAIC pays +35.3%. But assemble that same car inside the EU from imported Chinese parts, and the surcharge vanishes. No EU-wide local content rule currently determines what counts as "European-made" for tariff purposes. EV batteries, which represent 30-40% of a vehicle's value, enter the EU at just 1.3% duty.

Chinese brands have exploited the gap. They doubled their EU market share after tariffs were imposed, partly by switching to plug-in hybrids (not covered by the duties), whose exports jumped +892% in one year. The Rhodium Group identifies the core tactic: Chinese firms build "minimal footprint" assembly operations inside the EU to get the European label without meaningful technology transfer.

Who Gains, Who Gets Squeezed

Southern and Central European regions with empty factories get jobs. Spain's unions celebrate Leapmotor as a "turning point" after years of uncertainty.

Germany faces a different kind of pressure, and it comes from multiple directions at once. The VDA (Germany's auto industry association) projects 225,000 jobs lost by 2035, with 100,000 already gone since 2019. But the VDA itself says the main driver is not Chinese competition. It is the EU's 2035 CO2 fleet regulations, which force the shift from combustion engines to electric and hydrogen powertrains (VDA, Handelsblatt). Chinese factories in Spain don't kill those German jobs. The regulatory transition does. What Chinese competition adds is a collapsing export market: VW, BMW, and Mercedes held just 1.6% of China's EV market in Q1 2026, and VW's operating profit from China fell to €83 million, down from a historic average above €500 million per quarter.

France is trying to close the loophole. Foreign Minister Barrot warned EU colleagues that China is "dividing us: telling one, you'll get a factory here, telling another, you'll get market access there". Paris backs the Commission's proposed Industrial Accelerator Act, which would require 70% EU-origin content for EVs receiving state subsidies. But that rule won't apply until 2027-2028, and it covers subsidized vehicles only, not tariff classification (chinaobservers.eu).

The date that concentrates minds is May 21, when Stellantis CEO Antonio Filosa presents the group's new industrial plan. If Italy gets marginal production allocation, Chinese investment stops being a contingency and becomes the country's industrial strategy. The EU's new FDI screening regulation, expected by summer 2026, will for the first time cover greenfield investments, not just acquisitions. The factories, though, are already being built.