BYD Plans Battery Plant in Europe to Accelerate Local Production

BYD's European advisor and former Fiat Chrysler executive Alfredo Altavilla revealed in Turin, Italy, that the company plans to build three vehicle assembly plants and one battery factory in Europe. The strategy involves fully acquiring and retrofitting existing facilities to complete the transformation quickly with relatively low investment.

"Spain and France are currently the most feasible options, and the location for the second European passenger car factory will be confirmed by the end of the year," Altavilla said.

From Export to Localization: A New Phase for BYD

BYD's globalization strategy is shifting from "exporting vehicles overseas" to "deep-rooted localization abroad." The addition of a new overseas battery factory signals BYD's intent to embed its power battery production directly into the European market.

Localization First: Battery Production

BYD's decision to build a battery plant in Europe is not impulsive but a strategic move aligned with its overseas business development.

Financial Performance:

• In the first half of 2026, BYD's revenue from China (including Hong Kong, Macau, and Taiwan) was RMB 163.547 billion, accounting for 47.43% of total revenue.
• Overseas revenue reached RMB 181.268 billion, accounting for 52.57% of total revenue.
• This marks the first time BYD's overseas revenue surpassed its domestic revenue.

Sales Performance:

• 2025 European sales: approximately 188,000 units, up 270% year-on-year.
• January–May 2026: sales exceeded 100,000 units, up 144% year-on-year.
• First-half 2026 total exports: over 790,000 units, up 71% year-on-year, representing 44% of total company sales.

With overseas revenue exceeding domestic revenue, BYD has stronger incentives to localize its core power battery production overseas.

Existing Overseas Battery Footprint

BYD has already tested the waters with partial localization:

• Thailand: Rayong factory with an annual capacity of 150,000 vehicles, with a supporting battery production line for localized cell supply.
• Brazil: Camacari flagship factory in Bahia state, with a total investment of BRL 5.5 billion; passenger vehicle battery production is a core component.
• Vietnam: In January 2026, BYD signed an agreement with Vietnam's Jinlong Motor to invest USD 130 million in a joint commercial EV battery factory in central Vietnam, built in two phases to reach a core capacity of 6 GWh annually.

Drawing from these smaller-scale localization efforts, BYD's subsidiary FinDreams Battery is now poised for a large-scale entry into the international market. Its planned European production capacity is expected to exceed 30 GWh, making the European battery plant a critical piece of BYD's global battery capacity network.

Urgency Driven by EU Local Content Rules

The EU's increasingly stringent local content regulations are accelerating BYD's plans for a European battery plant.

The EU's Industrial Accelerator Act (IAA), formally proposed in March 2026, targets sectors heavily invested in by Chinese companies, including batteries, EVs, photovoltaics, and critical raw materials. The act introduces exclusive "EU-origin" clauses for public procurement and support, requiring at least 50% of employees to be local.

For batteries, the pressure is more specific:

• 6 months after enactment: 70% of vehicle components (excluding batteries) must be produced in the EU; three key battery components, including cells, must be produced in Europe.
• 3 years after enactment: Batteries must contain five EU-origin components to be classified as "EU-made."

Combined with the current 27% import tariff on Chinese EVs, the urgency for localized production has increased significantly.

This means that even if BYD assembles vehicles in Hungary, if battery cells are still imported from China, the vehicles may not qualify as "EU-made." The absence of a battery plant would become the weakest link in the entire European localization chain. BYD's plan to build a dedicated battery factory is intended to fill this gap.

Acquisition and Retrofitting as Preferred Strategy

BYD's approach to establishing the battery factory mirrors its vehicle plant strategy: prioritizing full acquisition and retrofitting of existing facilities over greenfield construction.

Altavilla stated clearly that BYD needs to find facilities that can be purchased quickly and retrofitted with relatively low investment to accelerate local mass production in Europe. He noted that BYD's team continuously evaluates various factories, and he frequently travels across Europe for site inspections.

The logic is clear:

• Building a new battery factory from scratch typically takes three years or more, from site selection and approval to production.
• EU local content rules are approaching rapidly, leaving no time to waste.
• Acquiring and retrofitting existing capacity can compress the timeline to under one year.

Meanwhile, idle production capacity in Europe is becoming an entry point. Spanish vehicle plants, in particular, have significant capacity slack:

| Factory | Designed Annual Capacity | H1 2026 Production | |---|---|---| | Ford Valencia | ~500,000 units | 48,400 units | | Stellantis Madrid | N/A | Down 42% YoY | | Renault Palencia | >300,000 units | ~60,000 units |

The supporting infrastructure and supply chain resources at these idle facilities are also attractive for battery plant deployment.

Italy is positioned as a "Plan B." Altavilla remarked, "What I care about is finding the best conditions to ensure competitiveness. I hope to find these conditions in Italy, but so far, I haven't."

Hungary Nears Production, Turkey Project Shelved

Behind the long-term European battery factory plan, BYD's current capacity deployment is undergoing clear trade-offs.

Hungary:

• The Szeged factory began trial production in early 2026 (960 employees).
• Mass production is expected to start in November or December.
• Final capacity target: 200,000 vehicles per year.
• BYD's European headquarters and R&D center have moved to Budapest.
• The company has also deployed electric bus production and battery assembly operations in Hungary.
• The Hungarian factory is the current top priority.

Political Risk: Hungary's new government has begun reviewing large-scale investment projects. BYD's investments in Hungary over the past decade are under scrutiny, and environmental enforcement is tightening. While BYD states it has complied with all local regulations, political uncertainty remains a risk to monitor.

Turkey: The previously planned USD 1 billion Turkish factory has been shelved. BYD Executive Vice President Li Ke confirmed the project is "in a shelved state, with no timeline for starting production in Turkey." Reasons include:

• Although Turkey is within the EU Customs Union, "EU-made" rules may still exclude Turkish-produced vehicles.
• The lack of a local battery supply chain in Turkey also affected the investment decision.

Between these advances and retreats, BYD is evaluating each overseas capacity deployment with greater caution—prioritizing resources for the Hungarian factory while steadily advancing the European battery factory as a long-term strategic goal.

Conclusion

From an industry perspective, BYD's European battery factory plan sends a clear signal: idle production capacity in Europe is becoming an entry point for Chinese manufacturing. This path applies not only to vehicles but also to batteries, photovoltaics, construction machinery, and other sectors constrained by local content rules.

From "exporting vehicles" to "building vehicles locally" and now to "producing batteries locally," BYD's European strategy is deepening. This yet-to-be-announced battery factory may carry greater strategic weight than the three vehicle assembly plants combined.