Italy and Spain Court Chinese Automakers to Dodge 45% Electric Vehicle Tariffs

Brussels charges up to 45% on Chinese electric vehicles imported into the EU (EU Access2Markets). At the same time, Italy, Spain and Hungary are courting the same Chinese manufacturers to build inside Europe. The tariff was meant to defend European industry. It has instead turned factory investment into an EU-wide auction, with direct consequences even for small markets like Malta, where EU trade decisions quickly show up in showroom prices and supply.

The Auction

Spain has at least nine Chinese automotive plants at an advanced stage, with total investment above €15 billion. CATL's €4.1 billion battery gigafactory in Zaragoza alone is expected to create 3,000-4,000 jobs (La Vanguardia). In Hungary, BYD's Szeged plant began trial production in January 2026, with a target of 150,000 vehicles a year and plans to double that (electrive.com).

Italy shows the pressure most clearly. Stellantis's Cassino plant operated for just 17 days out of 90 in the first quarter of 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 resisted Chinese carmakers, now says plainly: "Two or three Chinese car companies are thinking about investing in Italy, and they are welcome". BYD has confirmed that Italy is on its "short list".

The Tariff Loophole

The EU's countervailing duties, meaning extra charges added to the standard 10% import tariff to offset Chinese state subsidies, apply to vehicles made in China. BYD pays an extra 17%. SAIC pays an extra 35.3%. Assemble the same car inside the EU using imported Chinese parts and that surcharge disappears.

There is no EU-wide local content rule deciding 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 moved quickly through that gap. They doubled their EU market share after the tariffs were imposed, partly by switching to plug-in hybrids, which are not covered by the duties. Exports of those hybrids jumped +892% in one year. The Rhodium Group describes the core tactic: Chinese firms create "minimal footprint" assembly operations inside the EU, gaining the European label without serious technology transfer.

Who Gains, Who Gets Squeezed

Southern and Central European regions with idle plants get jobs. Spain's unions have welcomed Leapmotor as a "turning point" after years of uncertainty.

Germany is under a different kind of pressure, from several directions at once. The VDA, Germany's car industry association, projects 225,000 job losses by 2035, with 100,000 already gone since 2019. But the VDA itself says the main cause is not Chinese competition. It is the EU's 2035 CO2 fleet rules, which force the shift from combustion engines to electric and hydrogen powertrains (VDA, Handelsblatt).

Chinese factories in Spain are not what closes those German jobs. The regulatory transition does that. What Chinese competition adds is the collapse of a market German manufacturers once treated as dependable. VW, BMW and Mercedes held just 1.6% of China's EV market in the first quarter of 2026. VW's operating profit from China fell to €83 million, from a historic average above €500 million per quarter.

France wants the loophole closed. 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.

That rule, however, will not apply until 2027-2028. It also covers subsidised vehicles only, not tariff classification (chinaobservers.eu). In practice, the investment decisions are moving faster than the rulebook.

The date now concentrating minds is May 21, when Stellantis CEO Antonio Filosa presents the group's new industrial plan. If Italy receives only marginal production allocation, Chinese investment will no longer be a contingency plan. It will become 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. By then, many of the factories may already be rising.