The Paris Motor Show, as one of the few major automotive shows remaining, offers a good look under the surface of the motor industry and reveals striking market dynamics. Once, the show floor would have been dominated by European automotive giants and their combustion engine vehicles, but change was in the air this year. Chinese carmakers of all segments and sizes were the hottest talking points this year, as they hoped to sway potential customers who may never have even heard of them before the event. BYD, Hongqi, Skyworth, Leapmotor, Forthing, Aito, Xpeng, GAC and more were in Europe, many exhibiting for the first time. There were sub €20k city cars (such as the Leapmotor T03), all the way to 1200hp electric hyper cars with staggering acceleration. The breadth of vehicles on display shows that carmakers are not just targeting low- or high-end but are coming equipped for all segments. Why have Chinese carmakers decided that Europe is the next market to expand into?

The context: A struggling domestic market, 2025 regulations and trade tariffs

The European car market is in a challenging position. H1 2024 was a poor year for electric vehicle (EV) sales. IDTechEx's new report, "Plug-in Hybrid and Battery Electric Cars 2025-2045: Technologies, Players, Regulations, Market Forecasts," reveals that just 1.4 percent more EVs (BEV and PHEV) were sold in H1 2024 than in H1 2023. The report also shows that much of this slowdown can be attributed to a poor economic situation in Germany, the region's largest car market.

2025 will bring major changes to the market, albeit some that not all OEMs seem prepared for. As detailed in the report (link to report), 2025 will see a major reduction in the permissible fleet average CO₂ targets of manufacturers. Put simply, they will have to sell fewer polluting vehicles or face astronomical fines. Although there are many pathways to compliance, IDTechEx research reveals that the most viable of these is to increase BEV sales share. 2025 is only the next step en-route to a completely zero-emissions market by 2035, by which time IDTechEx expects the vast majority of European car sales to be fully electric. Some manufacturers are publicly against these regulations, with BMW's CEO using a speech at the Paris Motor Show to outline how these regulations would be catastrophic for the car industry. Others, such as Stellantis, say that they are ready and do not support a change to the legislation.

Entering into this already complicated situation are Chinese car manufacturers. IDTechEx research firmly places the Chinese car market as the largest EV market in the world. It is estimated that in 2024, NEV (new energy vehicles, umbrella term for BEV + PHEVs) sales could reach 50 percent of all new car sales. This is far beyond the central government's most optimistic predictions. This growth in scale has led to decreasing costs of production, with IDTechEx estimating that BEVs are now cheaper to purchase than ICE vehicles in China. The fast growth has also led to a scramble for market shares and an ensuing price war, where OEMs cut prices to secure a market foothold at the expense of profitability. IDTechEx research indicates that the most popular BEVs and PHEVs have decreased in price by 9 percent and 20 percent, respectively, in just 1 year. Compared with this, the rest of the world is seeing prices stagnate or even increase.

This brutal price war is expected to result in a consolidation of players as stragglers are eliminated. In this context, it is unsurprising that carmakers are looking for alternative markets to sell their products. Europe is the perfect market for Chinese carmakers, but why?

• The U.S. is a larger car market by volume but is ringfenced by the IRA and 100 percent tariffs on Chinese EVs.
• Europe is the next largest car market in the world.
• Market profile: Smaller car segments tend to be more popular in Europe than in the U.S., and this matches the domestic Chinese profile, allowing for more model crossover.
• Lack of domestic competition: European legacy automakers have brought EV portfolios to market, but these have thus far been limited to premium segments and had limited model availability. Europe also does not have a major domestic disruptor like Tesla in the U.S.
• A market with strong electrification potential: the EU regulations dictate that nearly all sales will have to be electric by 2035. IDTechEx estimates that this will equate to over 16 million BEVs sold in 2035, compared with just 1.8 million sold in 2023. There is a big gap to be filled.

Tariffs may not be enough, but European OEMs are not down and out

The European Union introduced tariffs against Chinese-manufactured EVs in mid-2024. These range from 9 percent for Tesla's built-in Shanghai to 36 percent for SAIC (who own MG). The tariffs were seen by many to protect domestic industry from Chinese manufacturers undercutting in price. However, the Paris Motor Show indicates that these will not be significant enough to deter OEMs, with many either raising prices slightly (still often being more affordable than domestic alternatives) or simply absorbing the tariffs. Many (such as BYD) are already planning local production in European factories that would bypass tariffs altogether. Some (such as Leapmotor) have partnered with domestic manufacturers to produce vehicles in their factories, again bypassing tariffs.

The Paris Motor Show did provide some hope for domestic manufacturers. Renault, Citroen, Peugeot and BMW, all had strong electric showings. In particular, the number of models outside the traditional premium/SUV market showed things were headed in the right direction. Renault made waves with its chunky, retro-styled 'Renault 5', with a price tag of as low as €25k. It looks set to be a solid competitor to BYD's lower-cost models.

In this dynamic and challenging time for automotive, comprehensive data and analysis can help to understand the underlying trends guiding the market. IDTechEx's new report on the topic, "Plug-in Hybrid and Battery Electric Cars 2025-2045: Technologies, Players, Regulations, Market Forecasts," explores key factors such as:

• Europe: historic sales performance, EV market share by OEM, assessing each OEMs readiness for the CO₂ regulations, PHEV outlook.
• USA: EPA and CARB CO₂ regulations, the rise of electric pickup trucks, the impact of IRA and federal tax credits.
• China: NEV market growth, the success of PHEVs and changes to the regulations in light of unprecedented NEV growth.

As well as exploring the key technological trends underpinning the EV market, including PoE, Li-ion batteries and traction motors.