Several major global automakers are gearing up for a significant showdown over compact vehicles in Europe, with established local giants such as Volkswagen and Renault striving to keep their dominance in this segment intact. influx of cheap electric vehicles (EVs) From BYD and its counterparts in China.
Last month, BYD , which surpassed Tesla Last year, as the global leader in electric vehicle manufacturing, unveiled its Dolphin Surf subcompact hatchback for the European market. This particular model is the brand’s entry-level offering, referred to domestically in China as the Seagull. It comes with two pricing options: starting at €22,990 ($26,128) for a version capable of traveling up to 322 kilometers per charge, or going up to €24,990 for one that can cover distances of 507 kilometers before needing to be recharged. Additionally, a current promotional offer has reduced the base price down to just €19,990.
The compact car segment represented "the next frontier for electrification in Europe," with significant potential, according to Maria Grazia DaVino, BYD’s regional managing director for Europe, during a launch event in Berlin.
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This statement reflects BYD’s intention to venture into the small car market in Europe," explained Felipe Munoz, a senior analyst at Jato Dynamics. "The vehicle is highly competitive and could disrupt the small car sector due to its pricing strategy.
The arrival of this vehicle signifies a significant chance for European customers to "at last" enjoy a competitive offering," he stated. However, it also serves as a warning to European automakers who have found it challenging to produce truly competitive compact vehicles.
This year, the electric vehicle (EV) market in Europe has gained momentum as automakers work to comply with European Union emission standards. There is a requirement for new cars and vans to reduce their CO2 emissions by 15 percent this year relative to 2021 levels, with an ambitious target of up to a 55 percent decrease by 2030. In line with these efforts, EV sales rose by 22 percent year over year during the initial four-month period of 2025, as reported by Rho Motion.
Include the information that achieving cost equality between smaller electric vehicles (EVs) and conventional internal combustion engine (ICE) automobiles is anticipated by 2028 or 2029. Additionally, the compact car segment in Europe is poised for resurgence following difficulties experienced since the onset of the COVID-19 pandemic. This transition has the potential to spur further expansion in the EV sector, according to Stuart Pearson, who serves as the global head of automotive equity research at BNP Paribas, during a recent press conference.
European customers prefer compact electric vehicles due to their practicality, along with considerations related to the environment and cost. As stated by Vincent Piquet, the CFO of Renault Group’s EV unit, Ampere, “The age of our cities means narrower streets; thus, we require user-friendly automobiles for urban navigation—models costing less than €25,000 that cater specifically to the European market.” This was shared with the Post earlier this month.
Several Chinese-produced vehicles, such as the Dacia Spring and Leapmotor T03, can be found in European markets for less than €20,000.
"As noted by George Whitcombe, a research analyst at Rho Motion, 'The entry of Chinese original equipment manufacturers has prompted their European counterparts to concentrate on producing smaller and more budget-friendly electric vehicles,' " he stated.
In the last half-year, European automotive manufacturers have introduced various compact electric vehicles like the Puma Gen-E, Renault 4, and Renault 5. In the coming eighteen months, significant launches include the VW ID.2 and Renault Twingo E-Tech.
Japanese and South Korean automakers are concentrating their efforts on producing compact and budget-friendly electric vehicles for the European market. Models such as the Kia EV2, Nissan Micra, and an additional small electric vehicle from Hyundai are anticipated to be introduced in Europe prior to the conclusion of 2026.
Although precise pricing details have not been released for these vehicles, they are anticipated to begin at approximately €25,000.
Based on data from Jato Dynamics, small cars made up approximately 20 percent of new vehicle registrations in Europe during 2024, which is similar to the previous year’s figures.
Matthias Schmidt, an independent European automotive analyst specializing in Chinese brand opportunities within the EU market, noted that the compact electric vehicle sector is poised for expansion, likely reaching price points near €20,000. He also mentioned that adopting more affordable lithium-iron-phosphate batteries—already widespread in China—would enable manufacturers to reduce costs.
Unlike their Western competitors, Chinese electric vehicle manufacturers were better positioned to reduce prices due to lower production expenses, even when facing tariffs imposed by the EU and US, according to Whitcombe. Additionally, firms such as BYD boasted more extensive ranges of vehicles, enabling them to attract a broader spectrum of customers, he noted.
Nevertheless, according to Whitcombe, Chinese manufacturers could encounter difficulties as European companies introduced an increased number of models aimed at the budget-friendly, compact electric vehicle market, since local brands had significant consumer support due to their strong brand loyalty.
So far this year, BYD’s market share in Europe has risen to 3.4 percent from less than 2 percent in 2024, as reported by Rho Motion. In contrast, Tesla's portion of European electric vehicle sales was cut in half in 2025 compared to the previous year.
In the meantime, Chinese firms such as BYD and Geely are also entering the hybrid electric vehicle (HEV) and internal combustion engine (ICE) markets partly to circumvent the EU’s 17 to 35.3 percent tariffs on Chinese-made battery electric vehicles (BEVs). According to Rho Motion's data, more than two-thirds of the automobiles sold by Chinese firms in the first quarter were either plug-in hybrids or gasoline-driven models, an increase from just over half during the same period last year.
Munoz from Jato Dynamics stated that 'the cake will stay unchanged, yet the Chinese manufacturers will seize market share from conventional automakers within these sectors.'
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