Tariffs vs. Tech: How BYD and Chery Are Outsmarting the West’s Trade Barriers
Why two Chinese automakers are reshaping the global automotive map one local factory at a time.
In the past, when Western countries wanted to slow down foreign competitors, they built trade walls: tariffs, regulations, and local content rules. It worked at least for a while.
But that strategy is showing cracks.
Today, two of China’s most aggressive and well-capitalized automakers BYD and Chery aren’t just exporting EVs. They’re exporting infrastructure. They’re embedding themselves inside the borders of the very regions that tried to shut them out. And they’re doing it by playing the same industrial game that Western automakers once used to enter China.
This is not just a supply chain story. It’s a playbook for global expansion under fire.
The Tariff Backdrop: How Protection Became the Trigger
To understand what’s happening now, you have to understand what triggered it.
The U.S. imposed a 27.5% tariff on Chinese-built vehicles starting in 2018. In May 2024, the Biden administration raised that number to 100% for Chinese electric vehicles.
The European Union is currently investigating Chinese automakers for state subsidies, with punitive tariffs expected as high as 35% by summer 2025.
These measures were meant to protect Western auto markets from low-cost, state-backed competition but they’ve done something else instead:
They’ve forced China’s top automakers to move faster and smarter than anyone expected.
BYD in Europe: Inside the Hungary Factory That Changes Everything
In late 2023, BYD announced it would build its first European car factory in Szeged, Hungary. The project broke ground in early 2024, with production expected to begin in late 2025.
This is a play straight from the globalization handbook but with sharper intent:
EU Tariff Shield: BYD will avoid the 10% base tariff on non-EU vehicles and sidestep upcoming punitive tariffs expected to target China-built EVs.
Regulatory Access: Cars built in Hungary are EU products. They qualify under European regulations, incentives, and fleet standards.
Cost Advantage: Hungary offers cheap labor, modern logistics infrastructure, and supportive trade terms inside the EU.
The factory is designed to produce 200,000 vehicles per year, likely including models like the Dolphin and Seal. Satellite images from early 2025 show extensive on-site battery integration confirming BYD’s intent to localize both vehicle and energy system production, not just final assembly.
Chery in Spain: A Plant, a Platform and a Drone
While BYD builds from scratch, Chery went tactical—reviving a shuttered Nissan plant in Barcelona through a joint venture with Spain’s Ebro-EV Motors. The factory started producing the S700 SUV in late 2024, with ICE and electric variants already rolling off the line.
But Chery isn’t just following BYD’s industrial blueprint—it’s now chasing it on the tech front, too.
Source: Chery Weibo, ITHome, AutoHome
On March 18, 2025, Chery unveiled its Fly Eye intelligent on-vehicle drone system in China.
This drone platform integrates directly with the vehicle’s operating system, providing:
Aerial road inspection
Parking assistance
Off-road navigation
Dynamic filming of vehicle performance for lifestyle content
While Western automakers are still refining their ADAS and lidar offerings, Chery is introducing features that blend automotive utility with drone tech, aimed squarely at digital-native consumers.
More importantly: systems like Fly Eye allow Chery to reframe the car not as a vehicle—but as a mobile tech platform. That matters in Europe and Latin America, where younger EV buyers expect more than range and price.
Eyes on Mexico: The USMCA Loophole Everyone’s Watching
The U.S. may have raised tariffs to 100%, but neither BYD nor Chery are trying to win through U.S. ports.
They’re trying to win through Mexico.
Under the United States–Mexico–Canada Agreement (USMCA):
Vehicles assembled in Mexico that meet local content thresholds can enter the U.S. tariff-free.
That content rule is 75% North American material and labor for most parts. It's strict—but not insurmountable, especially with local suppliers and battery partnerships.
What’s happening now:
Mexican officials confirmed in early 2024 that BYD is exploring a major manufacturing site in the north of the country.
Chery is also rumored to be scouting for land and partners to establish final assembly operations there.
If these facilities materialize, Chinese EVs will be on U.S. roads by 2026—legally and tariff-free.
This strategy echoes what Toyota and Honda did in the 1980s and what BMW and VW did in the 1990s: use Mexico as a manufacturing bridge into the U.S.
The Cost Structure Advantage That Tariffs Can’t Fix
Even if tariffs had worked, they don’t address the real issue: cost structure and integration.
Here’s what Western OEMs are up against:
The difference isn’t just the sticker price it’s the ability to control every node of the supply chain, compress development timelines, and avoid regulatory friction through local builds.
What Legacy OEMs Must Learn—Fast
Western automakers have spent the last decade optimizing for compliance, shareholder value, and premium positioning.
BYD and Chery are optimizing for market share, access, and mobility.
And they’re winning because they’re treating industrial policy as a roadmap, not a barrier.
If tariffs are too high, they build nearby.
If battery materials are constrained, they buy the mine or build the refinery.
If regulators slow imports, they localize assembly and lobby quietly at the regional level.
It’s a playbook that rewards speed over scale and execution over elegance.
What’s Coming in the Next 18 Months
Expect the following milestones by late 2025:
BYD will confirm a North American plant, likely in Mexico, timed with a U.S. policy loophole.
Chery will expand its European JV model, likely in Eastern Europe or Portugal to diversify risk.
Legacy OEMs will push for new forms of protection, possibly via digital security or software regulation—since tariffs alone are no longer effective.
Chinese EVs will gain serious traction in Latin America, Africa, and Southeast Asia, regions where trade barriers are lower and price sensitivity is high.
Conclusion
Western trade policy was supposed to protect domestic auto markets from subsidized Chinese competition.
Instead, it accelerated a shift that’s now hard to reverse: global localization by Chinese automakers who aren’t just exporting products they’re exporting entire ecosystems.
BYD and Chery aren’t dodging the rules.
They’re using them.
And the longer legacy automakers wait to respond with local price competitiveness, platform agility, and supply chain resilience, the more ground they’ll lose not just abroad, but at home.
Share this post