BYD Eyes Spain for 3rd European EV Factory to Expand Production In Europe

China's leading automotive manufacturer BYD is evaluating Spain as its preferred location for establishing a third European production facility, according to sources familiar with the discussions, as reported by news agency Reuters. The expansion highlights the electric vehicle maker's ambitions to increase its market presence across Europe.

The potential Spanish manufacturing site would complement BYD's existing European production strategy, which includes facilities currently under development in Hungary and Turkey. This expansion could be a major development for the Tesla competitor, while Spain stands to strengthen its position as a key player in electric vehicle manufacturing across Europe.

According to insider sources, as quoted in the report, Spain's appeal stems from its competitive production expenses and robust renewable energy infrastructure, making it an attractive destination for large-scale automotive manufacturing operations.

Though industry experts were aware of BYD's search for additional European manufacturing capacity, Spain's position as a leading candidate represents a new development in the selection process.

Regulatory Hurdles

"Spain would be an ideal location for further expansion of BYD's European manufacturing footprint because of its industrial infrastructure and cheap electricity," BYD country manager for Spain and Portugal Alberto De Aza was earlier quoted as saying by Reuters.

However, industry insiders caution that no definitive commitment has been announced, with other European nations still under consideration. Any final determination regarding the facility's location requires authorisation from Chinese government regulators, with a decision anticipated before year's end.

Previous reports indicated that BYD examined potential sites in Germany, though internal discussions raised concerns about elevated labor expenses and energy pricing in that market.

Representatives from Spain's Industry Ministry and BYD both declined to provide official statements on the matter.

Aggressive European Growth Strategy

The Chinese automaker has experienced remarkable European market expansion, with deliveries surging 280% during the initial eight months of 2025 compared to the corresponding period in 2024. This growth followed BYD's strategic decision to offer both plug-in hybrid and fully electric vehicle options to European consumers.

Earlier reporting revealed that BYD restructured its European business operations to accelerate sales performance through expanded management teams and an increased dealer network.

Diplomatic Factors

Economic relations between Spain and China have strengthened significantly in recent years. Notably, Spain chose to abstain during a European Union vote addressing tariff measures on Chinese-manufactured electric vehicles. Intelligence sources previously reported that Chinese authorities privately advised domestic manufacturers to suspend investment activities in European countries supporting these trade restrictions, while Germany opposed the tariff implementation.

As Europe's second-largest vehicle manufacturing nation, Spain has successfully attracted substantial foreign investment from major players including Volkswagen from Germany, along with Chinese companies Chery and CATL. These investments followed Spain's 2020 announcement of a 5 billion euro ($5.8 billion) incentive program designed to attract electric vehicle and battery production facilities using European Union pandemic recovery funding.

Three-Year Localisation Strategy

BYD has established an ambitious objective to manufacture all European-sold electric vehicles within the continent over the next three years, a strategy that would help the company circumvent EU import tariffs.

The company's Hungarian manufacturing facility remains under construction, although sources indicated in July that BYD has adjusted its timeline for full-scale production at that location to next year. The Turkish production site is scheduled to commence operations in 2026.