From Fortune:

BYD, a Chinese carmaker previously unknown to many, is now making waves with its ultra-low prices and entry into the European market. BYD’s ability to keep prices 40% below competitors thanks to its control of the entire EV battery system is causing concern for European automakers. However, the group’s declining share price and ongoing regulatory investigations may pose challenges to its expansion into Europe.

While BYD has a strong hold on the Chinese market and has announced plans to build a production factory in Hungary, its stock has fallen over 16% in the last year. Additionally, regulatory investigations into Chinese subsidies and the possibility of import tariffs in Europe may affect the carmaker’s potential expansion. European automakers have the benefit of long-standing customer loyalty and may provide stiff competition.

European carmakers may have an advantage with respect to customer loyalty, as a study by Bloomberg Intelligence found three in five European drivers are likely to stick with their current brands. The credibility and trust that European brands enjoy may help them defend against new entrants like BYD. European automakers may need to earn new trust for their electric vehicles, but have a solid foundation to build upon.

Another obstacle BYD faces is the challenge of adapting its affordable cars to Europe’s complicated infrastructure. The need for digital connectivity in cars, as well as the various different jurisdictions and languages within Europe, may prove difficult for a company used to operating within China. Additionally, differing mobile networks and SIM cards in each country could complicate rollout.

Ultimately, BYD’s success or failure in Europe may come down to whether it can convince customers to overcome reservations about purchasing from a Chinese auto brand, as well as its ability to offer superior value to a diverse range of potential EV consumers compared with its competitors. Europe’s automakers will face stiff competition, but may have the advantage of long-standing customer loyalty.



Read more: BYD is coming for Europe—but high labor costs, connectivity issues, and stubbornly loyal customers might trip up the Warren Buffett-backed EV maker