BYD has just become Germany’s best-selling plug-in hybrid brand by exploiting a gap in the EU’s China tariffs. Brussels is now moving to close that gap before the rest of the market catches on.
BYD became Germany’s best-selling plug-in hybrid brand in May 2026, recording 4,290 new registrations in a single month. The compact Atto 2 DM-i drove most of that growth, followed by the larger Seal U DM-i and the Seal 6 DM-i Touring wagon.
Since October 2024 the European Union has stacked manufacturer-specific duties on top of its standard 10% car tariff for any battery electric vehicle built in China. Plug-in hybrids were left out entirely. German newspaper Handelsblatt reported on June 19 that the European Commission is now preparing to close that gap with new countervailing duties on Chinese PHEVs expected within weeks.
Where the Line Sits Today
The current BEV duties vary by manufacturer, based on how much subsidy the EU’s investigation found in each company’s home-market operations. The likes of BYD and Geely sit at the sharper end of that scale.
| Manufacturer | Standard Tariff | Additional BEV Duty | Total BEV Tariff |
|---|---|---|---|
| Tesla (Shanghai-built) | 10% | 7.8% | 17.8% |
| BYD | 10% | 17% | 27% |
| Geely | 10% | 18.8% | 28.8% |
| SAIC (MG) | 10% | 35.3% | 45.3% |
These tariffs only apply to Full Electric Vehicles. Plug-in hybrids pay only the standard 10%.
The Gap Chinese Brands Found
Chinese manufacturers noticed the opening almost immediately. Customs data tracked by industry analysts showed Chinese PHEV exports to Europe surging 892% in the first two months of 2025, reaching close to 26,000 units. Full-year European sales of Chinese-built PHEVs are estimated to have climbed from around 27,000 vehicles in 2024 to roughly 160,000 in 2025.
The European Commission’s own briefings ahead of this week’s summit confirmed the shape of it. Chinese EV imports fell after the 2024 tariffs took hold. Exports of hybrids and combustion vehicles rose to take their place.
BYD’s Hybrid Line Carries the Load
BYD’s DM-i Super Hybrid range did most of the work behind that shift. The Atto 2 DM-i alone added 2,113 registrations in Germany in May, more than any other plug-in hybrid sold in the country that month. In Spain, the Atto 2 DM-i and Seal U DM-i took first and second place in the entire PHEV market, well clear of the third-placed Ford Kuga.
BYD widened that lineup further in May with the Dolphin G DM-i, a B-segment hatchback pitched directly at the Volkswagen Polo, Renault Clio and Toyota Yaris. It runs BYD’s fifth-generation DM 5.0 Super Hybrid system with a combined range beyond 1,000km and around 105km on electric power alone. First European deliveries are due by autumn, right as any new tariff would be taking hold.
Brussels Changes Its Mind
The European Commission denied any plan to tax Chinese hybrids as recently as January 2026. That position has now reversed. Handelsblatt’s report cites senior EU officials and industry sources confirming an anti-subsidy investigation into PHEVs is already prepared, ready to move as soon as member states give their approval.
Germany’s own stance has shifted too. Berlin fought hard against the original BEV tariffs back in 2024. This time, the German government has not opposed the plan, a notable change given how much of BYD’s hybrid growth has landed on German roads.
EU heads of government were due to vote on the measure at Thursday’s summit in Brussels. The result of that vote had not been confirmed as this article went to publication.
Lower Duties, Same Target List
Reporting on the plan points to a structure similar to the existing BEV regime: manufacturer-specific duties added to the 10% baseline, with BYD, Chery and SAIC named as the main targets. The rates are expected to land lower than the BEV duties, since the battery (the component the EU’s subsidy case weighs most heavily) makes up a smaller share of a PHEV’s overall value than it does in a full electric car.
Whether a lighter duty actually slows the trend is a separate question. Analysis from the Rhodium Group has already found Chinese automakers retain a meaningful price advantage over European rivals even at tariff levels higher than the ones currently applied to BEVs.
Local Factories as Plan B
Tariffs have already pushed Chinese brands toward building inside the EU rather than shipping into it. BYD’s Hungary plant is set to start production next year. Xpeng has a deal with Magna Steyr to assemble cars in Graz, Austria. Stellantis and Leapmotor are doing the same in Zaragoza, Spain for the Leapmotor B10. None of those lines are running at scale yet and a PHEV-specific duty only sharpens the case for getting there sooner.
No Equivalent Gap in Australia
Australian buyers are watching this argument unfold from a completely different starting position. The China-Australia Free Trade Agreement cut the country’s passenger vehicle import tariff from 5% to 0%, fully phased in by 2019. There is no manufacturer-specific duty sitting on top of that rate for BYD, Chery or anyone else building cars in China. The entire tariff structure driving this EU story, BEV and now PHEV, simply has no Australian equivalent.
Australia’s real PHEV policy lever sits on the demand side, not the border. The Fringe Benefits Tax exemption that fuelled a wave of PHEV novated leases ended on 1 April 2025, when PHEVs stopped counting as zero or low emissions vehicles under FBT law. The government’s own statutory review has since ruled out bringing PHEVs back into that exemption, pointing to sales growth that’s continued without it.
That contrast lands directly on one model. The Atto 2 DM-i, the same car leading BYD’s charge through Europe’s tariff gap, recently secured Vehicle Type Approval for the Australian market. It will arrive here facing zero import duty and full FBT if acquired under a novated lease, the mirror image of the settings it’s currently selling into across the EU.
The vote in Brussels will decide how much room is left in that European gap. BYD, Chery and the rest of the Chinese PHEV push won’t wait around to find out. Watch the German and Spanish registration numbers keep climbing through winter, right up until the moment any new duty actually lands.
