China said to be one year late

“The great Chinese push from an EV side is coming one year too late. The gap in the market is closing as Western incumbents continue an almighty cost-cutting drive to become trimmer, more agile, and more cost-competitive, passing those savings through to pricing and margins as they roll out more EVs to meet CO2/ZEV mandate regulatory targets,” Schmidt said in a email exchange.

The European Union has strict and escalating carbon dioxide emission rules almost mandating an EV monopoly by 2035. Britain’s ZEV rules are even tougher.

“Renault has trimmed its costs per vehicle by an average of €400 ($471). The migration to lower-priced LFP battery technology is helping incumbents bridge the cost gap with Chinese competitors while tariffs continue to prevent a price-cutting bloodbath across Europe, as seen in China, and provide a floor to pricing. For incumbents to enter that price battle in Europe would be suicidal, as most vehicles are financed, and it would destroy key residual values,” Schmidt.

Dealer networks don’t appear overnight

There is no doubt that Chinese EVs and electrified vehicles present an awesome challenge. They are recognized as having a 30%-plus cost efficiency and therefore a big pricing advantage. Quality and styling has caught up with the Europeans (and Japanese and Koreans) too. But there are Chinese weaknesses. It’s relatively easy to flood the market with great cars and SUVs, but dealer networks take years and much investment to build up.

Chinese automakers are also cranking up an assault on the premium sector with products many say are just as good as BMW, Audi and Mercedes. That might well be true, but it would take an exceptionally strong sales pitch to persuade a European, willing to pay, say, $100,000 for a Porsche Panamera, to buy an NIO ET7, BYD Han, or BYD’s Denza Z9 GT. Even with prices up to $30,000 less, that would be a tough ask, and residual values on the Chinese models are likely to be weak.

And then there is the ability to cruise at high speeds on Europe’s autoroute network. Regular Chinese electric cars and SUVs are notably less capable in this role than European rivals, which mostly lag behind Tesla. Chinese motorways only allow cruising speeds of between 62 and 75 mph and this is monitored strictly. Mainland Europe limits are 81 mph, and some German autobahns are still unlimited.

Improvements required to be competitive on the autoroute

Chinese EVs are designed to match local speed limits but may be forced to improve aerodynamics and gearing to be able to compete with German speedsters. Reports from China say the latest Xiaomi SU7 can get close to German premium competitors.

Bernstein points to a recent survey by Horvath & Partner which said between October 2023 and December 2025 European interest in buying a Chinese car or SUV rose from 43% to 55%. Those saying they would definitely buy Chinese more than doubled to 13% from 6%. 21% of Europeans say they would not consider buying Chinese, down from 46%.

Bernstein agreed that Chinese brands have made progress in expanding dealerships and strengthening after-sales support. Residual value management remains a weak spot compared with European and other Asian competitors.

New European EVs rolling into the market

Bernstein said, in a report, that price remains the prime concern for EV buyers, which has helped Chinese companies, but a new wave of European vehicles will give them more leverage.

“With many lower price point EV launches from (European manufacturers) coming in 2026 and 2027, and tariffs and potential EU minimum prices on imported Chinese vehicles, the survey implies Europeans can still leverage their brands and distribution networks with consumers in Europe. Brands which accelerate development times and embrace evolution of software/ADAS (advanced driver assistance systems) can therefore likely maintain dominant market positions in Europe in the mid-term,” the report said.

In 2026, this so-called “sweet spot” for European EVs priced below €30,000 ($35,400) includes the Renault Twingo E-tech, Citroen e-C3, VW ID.2, Fiat Grande Panda and Skoda Epic. In 2027, the VW ID.1 will take a bow.

“One should not underestimate the advantages provided by well- established dealership networks and the comfort this provides customers, especially when it comes to service which is a particular consideration for business users,” according to the report.

In the first quarter of 2026, early unofficial estimates suggest Chinese EV market share in Europe has risen to close to 10%. BYD was on top, with about 7%, followed by SAIC’s MG 2 to 3%, Geely including Polestar and Zeekr 1 to 2%, and Chery 0.5% to 1%, including Jaecoo and Omoda. In 2025 Chinese EV market share was between 7 and 8% for about 230,000 vehicles.

The formidable premium moat in Europe

Schmidt said there is scope for China in the fleet market, while the premium sector will strongly resist any challenges, if BMW’s recent experience is typical.

“One window of opportunity for the Chinese is to pursue large fleet deals, such as car rental fleets, while incumbents, such as Renault, are looking to improve their sales channels, prioritize value over volume, and target private residual consumers rather than low-margin fleet deals.”

“From a premium perspective, the fact that BMW was able to increase the price of its (Neue Klasse) iX3 recently by €3,000 ($3,500) just months after its launch on healthy order intake numbers, really gives some clarity to that picture, and the fact that the premium moat in Europe will be much tougher to penetrate than it was in China, given that brand equity trump card,” Schmidt said.