- EU car registrations rose 5.7% y/y in 1H26, with Chinese OEMs capturing a disproportionate share of incremental market growth
- BYD, Chery, and Leapmotor accounted for nearly 60% of incremental EU registrations, highlighting accelerating Chinese market share gains across Europe
- Potential tariffs and reduced China export incentives could create near-term headwinds, but are unlikely to reverse structural market share shifts
- European OEMs are responding by rationalising capacity, costs, and production footprints, reflecting intensifying competition and persistent cost disadvantages against Chinese peers
- Favour Chinese over European OEMs, particularly BYD and Geely, supported by stronger cost competitiveness, faster product cycles, and overseas expansion
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Chinese OEMs capturing a disproportionate share of Europe's recovery. EU new car registrations increased 5.7% y/y to 5.9mn units in 1H26 per ACEA, but much of the incremental growth was captured by Chinese automakers. BYD registrations surged 168% y/y to 131k units, while Chery and Leapmotor grew 269%/527% to 85k/48k units respectively. Together, these three OEMs accounted for nearly 60% of the EU market's incremental registrations during the period, while BYD, SAIC, Chery, and Leapmotor's combined market share doubled to 6.6% from 3.4% a year earlier. In contrast, growth among incumbent European OEMs remained considerably more subdued, with the widening competitive gap increasingly reflected in their strategies to rationalise capacity, costs, and product portfolios.
Trade barriers unlikely to reverse the structural market-share shift. Potential additional trade measures on Chinese vehicles and possible reductions in China's auto export incentives could slow Chinese OEMs' European expansion near term, but we do not expect them to reverse the longer-term trend. Per JATO, Chinese brands continue to offer vehicles at c.9-10% lower average prices than its competitors, alongside competitive technology, specifications, and standard equipment, supported by advantages in supply chains and faster product development. More importantly, European OEMs are increasingly restructuring around a lower-growth environment: Volkswagen estimates >500k units of excess European capacity and plans further rationalisation till 2030, BMW is cutting costs and jobs, while Mercedes is shifting incremental production toward lower-cost Hungary and targeting further German cost reductions. We believe these actions reinforce rather than contradict the structural market-share challenge faced by the EU OEMs.
Prefer Chinese over European OEMs. We believe the widening competitive gap increasingly favours Chinese OEMs, with tariffs potentially moderating the pace of European share gains but unlikely to address the underlying differences in cost, technology, and product development speed. European OEMs face the more difficult task of simultaneously defending domestic market share, restructuring excess or high-cost capacity, and funding their electrification transition, which could constrain margins even as European auto demand recovers. These dynamics increasingly favour Chinese OEMs over their European peers, particularly BYD and Geely. BYD’s vertical integration, manufacturing scale, and an expanding European production footprint, positions it to capitalise on cost and technology advantages, while Geely’s improving overseas momentum, a broad multi-brand portfolio and attractive valuation signals rooms for continued expansion relative to incumbent European producers.
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