VW

VW CEO wants Europe to immediately slap tariffs on Chinese PHEVs

After lobbying against further tariff hikes on Chinese-made electric vehicles, German automakers now appear very nervous—almost desperate—as they pressure the European Union to "immediately" raise tariffs on Chinese plug-in hybrid electric vehicles (PHEVs). The reason is that these vehicles are exempt from the additional duties—incurring only the standard 10% import tariff applied to any product entering the EU—giving them a clear advantage over battery-electric vehicles. The latter face not only the standard 10% tariff but also a specific levy (ranging from 7.8% to 35.3%) designed to offset subsidies deemed illegal by the World Trade Organization and the European Union.

Oliver Blume, CEO of the Volkswagen Group, was the first to speak out against the current situation; until recently, the VW Tiguan held the title of Germany’s best-selling PHEV and ranked second across Europe. Now, to the surprise of German automakers—all of whom rely heavily on PHEVs—the top three spots for PHEV sales in Europe during the first half of 2026 were entirely claimed by Chinese models. The BYD Seal U DM-i took the lead, followed by the BYD Atto 2 and the Jaecoo 7, relegating the Tiguan to fourth place and pushing down sales of plug-in hybrids from other VW Group brands, as well as those from BMW and Mercedes.

It is worth noting that Blume and his counterparts at BMW and Mercedes had previously urged the EU not to impose heavy tariffs on Chinese electric vehicles—such as the 102.5% rate applied in the US—yet they are now advocating for the exact opposite regarding PHEVs, pushing for higher tariffs on that segment. And time is of the essence, as every Chinese plug-in hybrid sold in Europe (or in Germany, by far the largest European market) represents a lost sale for German brands. The VW CEO further stated that "we have no time to lose."

Blume acknowledges that "tariffs applied to electric vehicles produced in China"—even those from European or North American brands—have "restored competitiveness in the sector." However, he notes that PHEVs hold a significant advantage by not being subject to the same level of levies designed to offset illegal state subsidies; this has allowed them to capture a 28.3% share of the European PHEV market in the first half of the year, according to Dataforce.

To grasp the impact of the penalties imposed on Chinese EVs, consider that in 2024, they accounted for 22% of battery-electric cars sold, whereas in the first six months of 2026, that figure dropped to 17%. This occurred despite Chinese competition strengthening in Europe, with an increasing number of brands and models. Blume points out that China—grappling with excess production capacity (capable of manufacturing nearly 50 million vehicles, while the domestic market is expected to absorb only 22 million in 2026)—relies heavily on exports to move its vehicles.

While admitting he might "import VW vehicles made in China to Europe if commercially viable," the VW CEO vowed not to allow Chinese manufacturers to use the four German plants he plans to close—a move involving the layoff of over 100,000 workers—as a way to circumvent import tariffs. Blume thus criticizes automakers like Stellantis and Ford for agreeing to cede part of their European manufacturing capacity to Chinese brands.

It is about more than just a tariff dispute...The rise of Chinese brands also reveals a significant shift in the dynamics of European electrification. For much of the last decade, Volkswagen’s strategy relied on a direct transition from internal combustion engines to battery-electric vehicles. The group focused its investments on the MEB platform, the ID. family, and new battery plants, while viewing plug-in hybrids primarily as a stopgap technology.

In recent months, however, the landscape has changed. Volkswagen itself has once again expanded its lineup of hybrid models. In addition to continuing the Golf GTE, the brand introduced a new conventional hybrid (HEV) system for the Golf and the upcoming T-Roc, while rumors suggest the next-generation hatchback will retain a hybrid version as a core part of its lineup.

At the same time, the electric vehicle offensive continues. The upcoming compact family based on the ID.2all concept—now dubbed the "ID. Polo" as it represents the electric successor to the European Polo—aims specifically to make the brand's electric vehicles more affordable.

In other words, Volkswagen is beginning to regain competitiveness in the battery-electric sector just as it discovers that its greatest challenge has shifted to the plug-in hybrid segment.

A scenario reminiscent of Brazil...In Brazil, Chinese manufacturers such as BYD, GWM, Jaecoo, and Jetour have established plug-in hybrids as a key driver of electrification growth. Models like the Song Plus, Song Pro, Haval H6, Jaecoo 7, and Jetour T2 expanded the presence of this technology well before it achieved scale in Europe.

Meanwhile, Volkswagen has also begun revising its local strategy. Beyond electric vehicles, upcoming launches planned for Brazil include various levels of electrification—with projects involving mild-hybrid (mHEV) and conventional hybrid (HEV) systems—reflecting a market that has evolved differently than anticipated just a few years ago. Going beyond a simple debate over tariffs, the rise of Chinese manufacturers demonstrates that the transition to electric mobility is likely to be more diverse than many automakers had projected, with battery-electric vehicles and hybrids coexisting for a longer period.

A “more competitive” environment...Volkswagen’s CEO argues that the adoption of tariffs on BEVs helped restore a more balanced competitive landscape between European automakers and Chinese manufacturers. Consequently, he advocates applying the same treatment to PHEVs to prevent companies from simply shifting their exports to plug-in hybrid models as a way to circumvent the restrictions imposed on pure electric vehicles.

With the tariffs on Chinese electric vehicles coming into effect, several automakers from the Asian nation have shifted their focus to exporting plug-in hybrids—a category combining a combustion engine with a rechargeable electric system that, to date, is not subject to the same surcharges.

Despite pressure from Volkswagen, the European Commission has not yet announced a formal investigation into Chinese PHEVs, as it did previously with battery electric vehicles. However, the rapid expansion of Chinese brands in this segment has drawn the attention of traditional manufacturers, who fear a repeat of the scenario seen in the BEV market.

Volkswagen is currently in crisis, having recently announced mass layoffs. This has led analysts to even speculate about the possibility of the company being sold to a Chinese automaker like BYD.

Responding to lobbying by its automakers, the EU not only imposed higher tariffs on Chinese electric vehicles (citing manufacturing emissions) but also proposed scrapping the rule—approved in 2023—that envisioned the effective phase-out of internal combustion engines. Amid the oil crisis, the approval of the new rule is no longer considered a sure thing, contrary to initial expectations during last year's wave of policy reversals.

Autonews