European automobiles market and Chinese OEM competition: Chinese OEMs are set to gain European share through 2035, but Bernstein expects regulation, localisation and better European EVs to curb the pace.

Overview

This long-term European autos study examines how far Chinese OEMs can extend their market-share gains in Europe by 2035. Bernstein’s base case expects further expansion, but not a continuation of the exceptionally rapid recent pace because policy, higher local production costs and improved European EV offerings should constrain the Chinese price advantage.

Core views

Bernstein separates Chinese-origin brands such as BYD and Chery from Chinese-owned European brands such as MG, Volvo and Polestar. The latter category increased from 2.8% of the European market in 2020 to 5.1% in 7M26, while Chinese-origin brands rose from 1.0% in 2024 to 6.8% in 7M26. Consumer acceptance has improved materially: the share of consumers who would definitely not consider a Chinese car fell from 46% in 2H23 to 21% in 2H25. Chinese OEMs also benefit from China’s integrated supply chain, lower manufacturing costs, software-defined vehicle platforms and intense domestic overcapacity. China passenger-car exports rose 78% year on year to 888,000 units in August 2026, while exports represented 38% of China OEM sales versus about 20% a year earlier. Policy has changed the competitive path. EU countervailing tariffs on China-built BEVs took effect on 30 October 2024, producing total tariffs of 27.0% for BYD, 28.8% for Geely and 45.3% for SAIC. With PHEVs not subject to the additional tariff, Chinese OEMs shifted their focus: their Western European PHEV share climbed to 37.6% in June 2026, and BYD’s German registration mix changed from 96% BEV in 2024 to 39% BEV and 61% PHEV in 8M26. Bernstein expects higher PHEV tariffs after China rejected a voluntary import cap. It also expects the proposed Industrial Accelerator Act to impose a 70% EU local-content requirement excluding battery cells for EVs receiving support. Localisation may preserve market access but erodes the Chinese cost edge: Hungarian automotive labour costs are more than three times Bernstein’s estimate of roughly €5 per hour or less in China, while European suppliers charge a 20–30% premium across the board. The report argues that recent Chinese gains are real but can be distorted by incentives and channel mix. In Italy, an €11,000 scrappage bonus and Leapmotor discounts reduced the T03 customer price to €4,900, lifting Leapmotor share from 0.8% in January 2026 to 3.2% in February through May; after the scheme expired, its share fell to 0.9% in July and 1.2% in August. In Germany, BYD, MG and Xpeng had self-registration rates above the 14% market average in 8M26, while BYD and MG also had greater rental-fleet exposure. Bernstein notes that private registrations are typically the highest-margin channel, whereas rental and self-registration are poorer-quality channels. Chinese brands are expanding dealer networks, portfolios and prospective European factories. BYD had more than 1,000 European dealers and aims for 2,000 by end-2026; it is ramping trial production in Szeged, Hungary, and considers further EU capacity. Chery increased European volume 306% year on year to 155,800 units in 1H26, reaching 2.2% share, and is preparing Barcelona production through its Ebro joint venture. Leapmotor’s Stellantis-backed international joint venture reached 55,700 European registrations in 1H26 and has more than 850 sales and service points. Bernstein nonetheless cautions that several announced localisation plans have been delayed and that local production will raise costs. European incumbents are not uniformly losing share. Bernstein finds that Volkswagen, BMW, Mercedes and Renault have held or increased European market share over the past decade, with Stellantis accounting for the entire share loss among European OEMs. It sees Stellantis as most vulnerable because of overlapping, poorly defined mass-market brands, and also flags Ford, SEAT and potential structural pressure on Dacia’s price-sensitive customers. Premium OEMs—BMW, Mercedes and Porsche—are seen as more insulated by brand loyalty and competitive offerings. Product is described as the key defence: Renault 5 is the best-selling BEV in its segment year to date and the fourth best-selling BEV overall, while VW’s ID.Polo family combines competitive pricing, efficiency, dealer coverage and European production. The ID.Polo starts at €24,995; VW has confirmed more than 30,000 European orders, while Škoda reports more than 35,000 Epiq orders. In Bernstein’s 2035 base case, the European passenger-car market remains broadly flat at 13.5 million units. Chinese-origin brands rise to 1.7 million units and 12.4% share from 900,000 and 6.8% in 2026E; Chinese-owned European brands rise to 845,000 units and 6.2% share from 730,000 and 5.5%. Total Chinese OEM share reaches 18.7%, implying a 5.0% CAGR from 2026 to 2035, while European, Japanese and Korean shares decline to 59%, 11% and 6% from 62%, 13% and 8%. The bull case for European OEMs puts total Chinese OEM share around 15.8%, supported by 70% local-content rules, PHEV tariffs and effective European product responses. The bear case puts it at 22.2%, with Chinese-origin OEMs reaching 16%, if protection is insufficient, Chinese localisation succeeds and aggressive pricing and innovation persist. For Renault, Bernstein argues that market fears may have produced an excessive valuation discount. More than 90% of Renault earnings are estimated to come from Europe, but its share has been unchanged over the past decade and its products are viewed as resilient. Auto FCF yield is presented as the cleanest valuation measure because Renault’s historical EPS was distorted by its Nissan stake. The 2026E and 2027E Auto FCF yields are 12% and 18%, respectively, versus a 5% long-term median. Applying the 5% median yield to Bernstein’s €1.4 billion 2027 Auto FCF estimate would imply a €26.3 billion market capitalisation, more than three times the current market value cited in the report.

Analysis framework

Bernstein first defines Chinese brand origin, then reviews European market structure, segment and powertrain data, brand strategies, registration channels, tariffs, incentives and localisation plans. It combines these findings with forecasts by brand origin across major vehicle segments, then tests bull, bear and base cases for 2035 and applies an Auto FCF yield framework to Renault.

Methodology notes

• Industry AnalysisSupply-demand framework

  European market-share forecast by OEM brand origin, vehicle segment, powertrain, regulation and localisation.

  The report estimates how Chinese and incumbent OEM shares evolve within a broadly stable European passenger-car market, using demand, product, policy and cost drivers.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Local-content requirements and European production costs alter Chinese OEM supply-chain economics.

  Bernstein links tariffs and EU sourcing rules to higher labour and component costs, which it argues should weaken imported Chinese vehicles' price advantage.

• Valuation methodsFree cash flow analysis

  Renault Auto FCF yield valuation.

  The report compares Renault's forecast Auto FCF yields with its long-term median and uses a 5% yield on estimated 2027 Auto FCF to illustrate valuation upside.

• Event-Driven and Behavioral Finance

  Bull, bear and base-case 2035 European market-share scenarios.

  The report varies policy, localisation, Chinese pricing and innovation, and European product competitiveness to frame alternative outcomes.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Renault

  Viewed as a comparatively resilient mass-market beneficiary of compelling EV products and a discounted Auto FCF valuation.

  Strengths

  Renault 5 is the best-selling BEV in its segment year to date; Twingo and second-generation Dacia Spring were developed rapidly through ACDC and are made in the EU.

  Weaknesses

  More than 90% of earnings are estimated to come from Europe, making it highly exposed to regional competition.

  Comparison

  Bernstein calls Renault a rare bright spot among mass-market OEMs and rates it Outperform.

  Risks

  Dacia must demonstrate that recent sales losses reflect model-cycle effects rather than enduring customer loss to Chinese competitors.

• Stellantis (STLA)

  Identified as the European OEM most exposed to Chinese competition.

  Strengths

  Its Leapmotor International joint venture provides access to Chinese NEV components, dealer infrastructure and potential European localisation.

  Weaknesses

  Bernstein cites a bloated portfolio of poorly defined, overlapping brands and attributes European OEM share loss over the past decade entirely to Stellantis.

  Comparison

  Rated Underperform, versus Outperform for Renault and BMW.

  Risks

  Mass-market vulnerability, brand overlap and potential cannibalisation through shared Leapmotor dealership operations.

• Volkswagen (VOW.DE)

  European incumbent with product and dealer-network defences, though Bernstein expects Chinese OEMs to take share.

  Strengths

  ID.Polo family is considered competitive on efficiency, performance, packaging and total cost of ownership; VW has confirmed more than 30,000 orders for ID.Polo.

  Weaknesses

  Mass-market brands remain exposed to Chinese competition.

  Comparison

  Rated Market-Perform; Bernstein views Renault more positively in mass market.

  Risks

  Chinese value propositions may continue to pressure market share and pricing.

• BMW

  Premium OEM viewed as relatively insulated from Chinese competition.

  Strengths

  Brand loyalty, competitive offerings and new Neue Klasse EV efficiency are cited as defences.

  Weaknesses

  No specific operational weakness is highlighted.

  Comparison

  Rated Outperform and preferred alongside Renault.

  Risks

  Not immune to Chinese competition or broader European EV-market pressure.

• Mercedes-Benz

  Premium OEM viewed as relatively insulated by brand strength and competitive products.

  Strengths

  Bernstein highlights competitive electric-product efficiency and MB.OS technology.

  Weaknesses

  No specific operational weakness is highlighted.

  Comparison

  Rated Market-Perform, below BMW's Outperform.

  Risks

  Continued competitive pressure from Chinese and European EV launches.

• Porsche

  Premium OEM considered more insulated than mass-market peers.

  Strengths

  Brand loyalty and competitive offerings are cited.

  Weaknesses

  No specific operational weakness is highlighted.

  Comparison

  Rated Market-Perform.

• Volvo Cars

  Chinese-owned European brand exposed to the report's competitive and market-share themes.

  Strengths

  Part of Geely's controlled brand portfolio.

  Comparison

  Rated Underperform.

Key data

• Chinese-origin brand share12.4% by 2035 versus 6.8% in 2026EBernstein base-case forecast for the European passenger-car market.
• Total Chinese OEM share18.7% by 2035 versus 12.3% in 2026ECombines Chinese-origin and Chinese-owned European brands.
• European passenger-car market13.5 million units by 2035Implies flat growth from 2026 to 2035 in the base case.
• Chinese OEM PHEV share37.6% in June 2026Western European PHEV market share after the shift away from tariffed BEVs.
• Chinese OEM BEV share19% as of June 2026Share of the European BEV market.
• EU tariff on China-built BEVs27.0% for BYD; 28.8% for Geely; 45.3% for SAICTotal import tariff following additional countervailing duties.
• Renault Auto FCF yield12% in 2026E and 18% in 2027ECompared with a 5% long-term median.

Impact & implications

Bernstein expects Chinese OEMs to remain a structural competitive force in Europe, particularly in BEVs and PHEVs, but believes their ability to sustain very low prices will be constrained by tariffs, local-content requirements and the cost of EU production. The report favours Renault and BMW within its coverage, remains neutral on Mercedes, Porsche and Volkswagen, and is negative on Stellantis and Volvo Cars.

Risks

• EU consensus on stronger protectionist measures could weaken, allowing more unfettered Chinese imports.
• Chinese OEMs could successfully localise production while retaining their innovation and cost advantages.
• Aggressive Chinese price competition could spread more fully to Europe.
• European OEMs could fail to develop sufficiently compelling and competitive new products.
• Local-content rules may not be imposed broadly enough or enforced effectively.

What to watch

• Whether the EU extends punitive tariffs to China-built PHEVs.
• Final Industrial Accelerator Act details, including the proposed 70% local-content threshold and eligibility rules for subsidies.
• Progress and timing of Chinese OEM European factories, particularly BYD, Chery, SAIC, Geely and Leapmotor projects.
• Chinese OEM pricing, dealer-network expansion and the quality of registration channels.
• European order momentum and competitive performance of Renault 5, Twingo, Dacia Spring, VW ID.Polo-family vehicles and premium EV launches.
• Whether Dacia's recent sales losses prove cyclical or reflect lasting loss of price-sensitive buyers.