BYD Co. (OTC:BYDDF), a leading Chinese electric vehicle manufacturer, is set to launch its budget-friendly electric vehicle in Europe, posing a significant challenge to local automakers.

What Happened: BYD, which overtook Elon Musk's Tesla, Inc. (NASDAQ:TSLA) in the last quarter of 2023 to become the largest global EV manufacturer, is planning to introduce its Seagull hatchback in Europe next year. The vehicle, priced under $10,000, is expected to be sold for less than €20,000 ($21,500), even after tariffs and modifications to meet European standards, reported Bloomberg.

The Seagull's arrival is expected to intensify the competition among European automakers as they transition to the post-combustion-engine era. The vehicle, which has received acclaim for its build quality, design, and technology, is already performing well outside of China, particularly in Mexico.

"We are looking very closely at this model and others coming from Chinese EV makers," said Martin Sander, head of Ford Motor Co.'s European EV business. "Of course, we are nervous when new competition is coming to the market."

"Tariffs should not be used to shield our lead manufacturers from meaningful competition," Julia Poliscanova, senior director for vehicles and e-mobility supply chains at lobby group Transport & Environment said. "What matters on top of climate targets, which are critical, is actually to have local jobs and for decarbonization not to result in de-industrialization."

BYD, along with other Chinese automakers, is increasingly focusing on exports after dominating the domestic market. The company's plans for two plants in Europe are expected to mitigate the impact of any European Union tariffs aimed at slowing its progress.

"We have no intention to let this price band open for our Chinese competitors," Stellantis CEO Carlos Tavares said last week, dismissing calls for tariffs. "We don't think that protectionism will give us a long-term way out of this competition."

Why It Matters: The Seagull's competitive pricing and potential to disrupt global auto markets have been a cause for concern among U.S. automakers. The vehicle's success in China, combined with BYD's expansion into other regions, has put global automotive leaders and politicians under pressure.

BYD's success is not solely attributed to state subsidies, as the company has argued that its achievements are a result of its unique technology and efficient management.

The company's expansion into the luxury EV market with the unveiling of its premium brand's first sedan at the Beijing auto show also posed a direct challenge to luxury automakers such as Mercedes-Benz.