Plug-in hybrid vehicles (PHEVs) are exempt from the European Union's new tariffs on Chinese electric vehicles, and Chinese automakers have seized this opportunity swiftly.

Chinese PHEVs are rapidly flooding the European market. Thanks to the EU's tariff exemption policy for these vehicles, China's vehicle exports of PHEVs to the EU in May surged by 600% year-on-year.

This trend is part of a broader boom in China's plug-in hybrid passenger vehicle exports. According to data released Monday by the China Automobile Dealers Association (CADA), China's overall PHEV passenger car exports in May soared 127% compared to the same period last year.

In the first five months of 2025, China's exports of plug-in hybrid passenger vehicles—defined as cars with fewer than nine seats that combine a rechargeable battery with a traditional internal combustion engine—grew nearly 140%, reaching a total of 324,000 units.

This growth is primarily driven by surging demand in key markets, especially Europe. According to Chinese customs data, China's export volume and value of PHEV passenger vehicles to the EU in May rose by approximately 600% year-on-year.

PHEVs are categorized into three types: passenger vehicles, cargo vans, and buses/trucks. Passenger vehicles with fewer than nine seats are the most common.

Following the EU's imposition of tariffs of up to 45.3% on Chinese-made battery electric vehicles (set to take full effect in November), Chinese automakers are shifting their focus to plug-in hybrid vehicle exports.

Currently, PHEVs face only the EU's base 10% tariff, allowing Chinese brands to maintain competitive pricing and quickly expand their market share in this segment.

Yen Liang, an economics professor at Willamette University in Oregon, noted: “The export surge reflects both rising global demand for hybrid vehicles and the price competitiveness of Chinese PHEVs, because these vehicle exports face fewer tariffs and restrictions.”

“In May, global demand for EVs and plug-in hybrid vehicles grew by 24%, and Chinese PHEVs have greatly benefited from this trend.”

According to Chinese customs data, China's total export value of PHEV passenger vehicles reached $1.42 billion in May, making it the country's 20th-largest vehicle export category for the month.

Cui Dongshu, Secretary General of the China Passenger Car Association, stated that the current surge in Chinese EV exports is “primarily driven by the strong growth of hybrid and plug-in hybrid models, which are increasingly replacing battery-only EVs as the main growth engine.” The association is affiliated with the China Association of Automobile Manufacturers.

Analysts at UBS said in a report last week that Chinese automakers may continue gaining ground in Europe, as they can offer vehicles at prices that European companies struggle to match—while remaining profitable.

They added that Chinese brands currently hold a 6% share of the overall European car market, and an 11% share in the EV segment.

“The latest monthly data from Europe's five major markets shows that Chinese brands' market share is accelerating,” the analysts wrote, referring to the UK, France, Germany, Italy, and Spain. “We believe this could expand further in the coming months.”

Price remains a key competitive edge for Chinese brands in Europe. According to UK automotive news site Carwow, a new BMW X5 plug-in hybrid starts at £66,415 (around $90,417), while the MG HS PHEV—backed by Chinese automaker SAIC—starts at just £21,495, roughly one-third the price.

However, Liang warned that the newly imposed 25% U.S. tariff on Chinese cars could spark a wave of protectionist measures globally. Other countries may follow suit to protect domestic industries and offset potential losses from reduced access to the U.S. market.

Meanwhile, China's plug-in hybrid vehicle exports are also gaining traction quickly in Southeast Asia, North Africa, and the Middle East.

Chinese customs data shows that in May, China's PHEV passenger vehicle exports (under nine seats) to ASEAN and the Middle East surged by 3,800% and 1,600% year-on-year respectively, with around 5,000 units shipped to each region.

Exports to the UK and Turkey each grew by over 770% year-on-year, while exports to Australia rose nearly 130%.

In contrast, China's exports of fully electric vehicles in May declined by 8% year-on-year, to about 147,000 units.

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