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(Bloomberg) — Cheap electric vehicles from China are already pushing into Europe, undercutting one of the region’s biggest industries. BYD Co., which overtook Tesla Inc. last year to become the biggest global EV maker, is about to raise the stakes.

The Chinese manufacturer last month announced plans to introduce its sub-$10,000 Seagull hatchback in Europe next year, offering features like cruise control and wireless phone charging normally seen on much more expensive vehicles. Even after tariffs and modifications to meet European standards, BYD executives have pledged to sell the Seagull for less than €20,000 ($21,500).

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That would price the four-seater thousands below electric runabouts that Stellantis NV, Renault SA and others are counting on to help them bridge the energy transition. Its arrival is ratcheting up pressure on Europe’s automakers for dominance in the post-combustion-engine era. A competition investigation in Brussels isn’t likely to extinguish the threat.

“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.”

The Seagull has won plaudits for the build quality, design and technology BYD has packed in for the price. It’s no one-off: the company plans to introduce a higher-end €25,000 EV even before the city car, European Managing Director Michael Shu said at an industry event in London this month. BYD’s plans for two plants in the region will help it blunt the effects of any European Union tariffs meant to slow its path.

The model is already doing well outside its Asian home base. In Mexico, where the car is dubbed the Dolphin Mini, drivers have been flocking to buy the 358,800-peso ($19,780) car since its introduction in February, despite a charging infrastructure that’s still in its infancy. 

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Mexico “is not great for us, but in the end we found a lot of demand, a lot of heat for this,” BYD Executive Vice President Stella Li said at an event last week in the capital, unveiling a plug-in hybrid pickup for the Mexican market. 

BYD is in the vanguard of Chinese carmakers that are increasingly targeting exports after seizing control of their home market. Tesla CEO Elon Musk warned in January they’ll “pretty much demolish” most other carmakers if trade barriers aren’t erected.

While President Joe Biden has moved to almost quadruple US duties on Chinese EVs, essentially slamming the door on near-term imports, tariffs are more complicated for Europe. That’s because the region’s carmakers are more dependent on the Chinese market than their US counterparts, making them vulnerable to retaliatory measures from Beijing. And Europe’s plan to phase out sales of combustion-engine cars will require cheaper cars to boost mass-market adoption.

Read More: Biden Accuses China of ‘Cheating’ on Trade, Imposes New Tariffs

The EU has launched a probe of China’s EV industry and is nearing a decision on raising barriers, but industry executives and experts have pushed back. 

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“Tariffs should not be used to shield our lead manufacturers from meaningful competition,” said Julia Poliscanova, senior director for vehicles and e-mobility supply chains at lobby group Transport & Environment. “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.”

Read More: EV Market’s Surge Toward $57 Trillion Sparks Global Flashpoints

Founded in 1995, BYD started by making batteries, before expanding into automobiles in 2003. It started passenger car sales in Europe three years ago with splashy displays at both the Paris and Munich car shows. For now it’s the former British brand MG Motor that’s leading the charge, after spending years to rebuild its dealer network and customer base since its 2007 acquisition by Shanghai Automotive Industry Corp. It now has the UK’s second-best selling EV with the Chinese-made MG4, behind Tesla’s Model Y.

Incumbent European carmakers are considering unorthodox steps to counter the challenge, including new alliances. Renault is openly shopping around for partners to cut costs on a small-car platform, while Stellantis will start sales in September of cars made through its joint venture with China’s Zhejiang Leapmotor Technologies Ltd.

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“We have no intention to let this price band open for our Chinese competitors,” Stellantis Chief Executive Officer Carlos Tavares said last week about the upcoming European Seagull, dismissing calls for tariffs. “We don’t think that protectionism will give us a long-term way out of this competition.”

Tavares has long emphasized acting swiftly to counter the growing competition. The deal with Leapmotor, forged in October, offers the Jeep and Peugeot owner access to China’s cost advantages and advanced EV technology, which the US and EU have said benefit from unfair government aid. While the overall share of Chinese brands in Europe’s electric market was around 7% last year, Transport & Environment projects they could reach 11% this year and 20% in 2027.

Judging by the reviews, incumbent automakers in Europe and the US are right to take the Seagull seriously. Caresoft Global, a Michigan engineering firm that tears down vehicles to evaluate quality and manufacturing techniques, pored over the Seagull to assess money-saving details in its construction. 

“Everyone in the industry should be talking about this car, seriously, because it’s quite a vehicle,” Caresoft President Terry Woychowski said in a video posted on InsideEVs. “It changes the definition of cheap and cheery, which basically said, ‘Oh, sell something that’s just really cheap.’ This doesn’t come across that way at all.”

—With assistance from Monica Raymunt, Kelsey Butler, Danny Lee and Craig Trudell.

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