European automakers face years of profit pressure as Chinese companies gear up for a long-term attempt to win sales. But the locals will dispel worries of a complete collapse and emerge with a smaller but still viable industry, according to a report.

“It might be more than one acorn, but the sky is not falling,” HSBC Global Investment Research said in a report.

The first attempts by the Chinese to sell their cars and SUVs didn’t worry Europeans.

“Early attempts were met with ridicule, but those failings are now a distant memory. A quick appraisal of the current Chinese offer shows, arguably, superior products that offer better value for money. As market data indicates, European consumers have shown little hesitation to embrace these new entrants . The market share of the Chinese (manufacturers) has been steadily growing; it now stands closer to 7%, but looks set to much higher,” the report said.

HSBC declined to comment on how much higher this might go.

Some experts expect overall Chinese market share in Europe to reach about 10% by 2030.

Chinese sales have been especially strong in Britain, where companies like Chery and BYD have reached 3 to 4% market share in a faction of the time it took previous new entrants like Toyota and Hyundai to hit that mark.

In Europe through April this year the leading Chinese car makers were SAIC ’s MG, BYD, Chery with its Omoda and Jaecoo brands, Geely , with its own brand and Zeekr and Lynk & Co, and Great Wall Motors , according to published data.

The Chinese have been notably successful in the electric vehicle sector, where sales are accelerating at a faster pace than combustion vehicles. According to Schmidt Automotive Research , electric vehicles will account for 24.9% of the Western European market in 2026, bringing volume above 3 million for the first time.

“Chinese (manufacturers) appear to be hitting a 14% market share ceiling across the regional EV new car market during 2026,” Schmidt Automotive said in its latest monthly report.

Steve Young, managing director of the British automotive retailing consultancy ICDP , talked about a famous remark by the CEO of PSA Group Jacques Calvet in 1992 about the threat to Europe from what he called the Japanese aircraft carrier parked off northern Europe in the U.K.

“However, another aircraft carrier has come into view. The announcement of the construction of a new plant in Galicia, Spain, for MG and the takeover of the surplus assembly line at the Nissan Sunderland plant by Chery will provide combined capacity of around 400,000 annually, which is equivalent to over half the total sales of Chinese brands across Europe in 2025,” Young said in his weekly blog.

BYD is building plants in Hungary and Turkey. Stellantis will make Leapmotors in Spanish plants.

The aircraft carrier has now come into view

“What is clear in my mind is that we are moving into a new phase of the Chinese brands’ presence in Europe, which will evolve over the next 2 to 3 years. The aircraft carrier has now come into view. When it has docked, the impact on the established players – manufacturers, suppliers and retailers – will be widespread,” Young said.

Dataforce analyst Julian Litzinger said the Chinese threat means European automakers face a dual challenge – technological agility and cost efficiency. The Chinese have based their threat on the so-called Software-Defined Vehicle, which allows its unmatched speed of development.

“Chinese brands are set to launch 56 models in Europe in 2026 – outpacing Japanese and Korean launches combined by nearly 3:1. Players like Chery, SAIC and BYD are flooding the market to see what sticks, then doubling down on the winners,” Litzinger said in a LinkedIn publication.

“For European (manufacturers) defensive measures like tariffs are only a temporary shield. Survival now depends on accelerating development cycles and closing the software gap. For Chinese (manufacturers) success in Europe requires more than just volume. It requires long-term brand building and navigating complex local fleet requirements,” Litzinger said.

HSBC is confident that despite these challenges the Europeans, with the aid of local brand loyalty, won’t succumb, but profits may suffer. Chinese market share gains will be largely at the expense of Stellantis and its multiple brands led by Peugeot, Citroen and Fiat, Ford and other Asian brands.

Double down on cost reduction

“European (manufacturers) will double down on cost reduction and settle in for a fight. Prior to recent developments in China, we would argue Europe is one of the most competitive auto markets globally. Excess capacity, rigid labour laws, and the prevalence of small cars made it a tough market to generate healthy profits,” the report said.

“It is against this backdrop that the Europeans now find themselves facing a fresh round of competition. We see them focusing on protecting profits, lowering variable and fixed costs, an ageing workforce helps, but the fight is likely to be tough,” the report said.

HSBC said the Chinese brands are not materially undercutting Europeans on price.

“The differences in manufacturers’ recommended retail prices appear to be a function of battery chemistry (cheaper Lithium Iron Phosphate vs Nickel Manganese Cobalt) rather than discounting. To our minds, this is a logical approach, because “cheap” is not necessarily a good starting point for brand building and does not support future residual values. Competing on product rather than pricing is an opportunity to drive better margins than at home.”