China’s BYD will build new factories in Europe for a bigger market share, as the world’s largest electric vehicle (EV) maker faces fiscal support pullback at home and rising trade barriers overseas, according to an executive.

“Europe is a very important regional market for BYD. We will not let tariff increases affect local consumers’ choice of BYD,” said Liu Xueliang, vice-president at the Shenzhen-based carmaker, in a recent interview.

Liu also reaffirmed that BYD was actively expanding its local footprint, with new plants in Europe set to be launched “soon”.

It aligned with a plan revealed by BYD’s overseas CEO Stella Li earlier this month that a plant in Hungary will kick off mass production in the last quarter of the year.

The commitment to BYD’s local production in the world’s third-largest regional car market came after the European Union said in mid-October it would impose a quota on the hybrid cars imported from China, two years after hiking the tariffs on Chinese-made all-electric vehicles to as high as 45.3 per cent.

On October 12, China announced that the value-added tax rebate rate on exports of new energy vehicles will be lowered from 13 per cent to 9 per cent starting April 1, 2027.

Together with the resumed battery consumption tax, China’s EV industry might see its profitability worsen “faster than expected”, JPMorgan said in a note on Tuesday.

Thanks to the established factories in Southeast Asia, BYD’s Liu expected the export tax rebate reduction to have limited impact on sales in the market.

In addition to the growing demand for EVs amid the global oil shock, BYD will continue to increase its overseas capacity, he added.

However, Liu noted that BYD had not yet decided whether to increase selling prices in overseas markets to pass on the tax costs, as competition over price points was also intensifying.

BYD’s planned capacities outside mainland China totalled 1 million EVs as of October, with only 30 per cent in Europe, according to a note by Morgan Stanley on October 13.

BYD’s share in the EU’s new car market surged to 2.4 per cent in the first nine months of the year from 1 per cent one year ago, after new car registrations swelled 154.4 per cent to 206,002 units over the same period, data from the European Automobile Manufacturers’ Association showed.

Even though BYD stepped up its efforts in exports to Europe, the shrinking demand at home dragged the first-half net profit to slump over 20 per cent year on year to 12.3 billion yuan (US$1.84 billion).

To improve profitability, BYD accelerated the overseas launch of its premium model Denza Z9GT this year. After a global debut in Europe in April, the carmaker unveiled the Z9GT model in Hong Kong on Friday with a starting price of HK$998,000 (US$127,260), over 200 per cent higher than that of 269,800 yuan in mainland China.

But Liu also admitted that BYD faced “many challenges” in overseas markets as it worked towards the goal of surpassing Japan’s Toyota and becoming the world’s top carmaker by 2030, which was announced by the chairman Wang Chuanfu at an annual meeting with shareholders in June.

Instead, the reduced reliance on fossil fuels supported by the massive global EV scale was far more meaningful than reaching the No 1 spot, Liu added.