Home General China Tells Carmakers To Pause Investment In EU Nations Backing EV Tariffs

China Tells Carmakers To Pause Investment In EU Nations Backing EV Tariffs

Members of the press and the general public check out the Atto 3 electric SUV made by Chinese carmaker BYD, at the Fully Charged Live electric vehicle trade show in Farnborough, Britain, April 28, 2023. REUTERS/Nick Carey/File Photo

China has told its automakers to halt big investment in European countries that support extra tariffs on Chinese-built electric vehicles, according to sources.

New EU Tariffs

The new European Union tariffs of up to 45.3% came into effect on Wednesday after a year-long investigation.

Retaliation From Beijing

This move divided the bloc and prompted retaliation from Beijing.

Over Half A Dozen EU Members Have Supported The Tariffs

Ten EU members including France, Poland and Italy supported tariffs in a vote this month, in which five members including Germany opposed them and 12 abstained.

Chinese Automakers Advised To Be Prudent About Heavy Investments

At a meeting last month, the Chinese Commerce Ministry told Chinese automakers including BYD, SAIC, and Geely  to pause their heavy asset investment plans in countries that backed the proposal.

They declined to be named, as the meeting was not public.

Several foreign automakers also attended the meeting.

According to sources, the Commerce Ministry advised participants to be prudent about their investments in countries that abstained from voting.

The ministry encouraged participants to invest instead in countries that voted against the tariffs

No Comments From Carmakers

Geely declined to comment.

SAIC, BYD and the commerce ministry did not immediately reply to requests for comment.

What Does The Chinese Move Suggest?

The move by Chinese authorities to suspend some investment in Europe would suggest the government is seeking leverage in talks with the EU over an alternative to tariffs, keen to avoid a sharp fall in EV exports to the key market.

Europe accounted for more than 40% of EVs shipped from China in 2023, according to Reuters’ calculations using data from the China Passenger Car Association.

Given 100% tariffs on Chinese-made EVs in the United States and Canada, a drop in EV exports to Europe would risk deepening overcapacity Chinese automakers face in their home market.

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Investments In Europe

During a visit to China by Spanish Prime Minister Pedro Sanchez last month, a Chinese company agreed to build a $1 billion plant in Spain to make machinery used for hydrogen production.

Spain was one of the 12 EU states that abstained.

Italy and France are among EU countries that have been courting Chinese automakers for investments, but they have also warned of the risks that a flood of cheap Chinese EVs pose to European manufacturers.

SAIC Looking For A Site For An EV Factory In Europe

State-owned SAIC, China’s second-largest auto exporter, is choosing a site for an EV factory in Europe.

SAIC has been separately planning to open its second European parts centre in France this year to meet growing demand for its MG-brand cars.

An aide to France’s junior trade minister Sophie Primas said they had no comment to make ahead of her trip to China next week.

Italy In Talks With Chery

The Italian government is in talks with Chery, China’s largest automaker by exports, and other Chinese automakers, including Dongfeng Motor, about potential investments.

Italy’s industry ministry declined to comment. Dongfeng didn’t immediately respond, while Chery declined to comment.

BYD Building A Plant In Hungary

Chinese automaker BYD is building a plant in Hungary, which voted against the tariffs.

The Chinese EV giant has also been considering relocating its European headquarters from the Netherlands to Hungary due to cost concerns, sources said.

Chinese Companies Are Cautious

Even before Beijing issued its guidance, Chinese companies were cautious about independently setting up production sites in Europe.

This is because setting up production sites requires large sums of investment and a deep understanding of local laws and culture.

Automakers Told To Work Together For Collective Talks

Sources said that automakers were also told to avoid separate investment discussions with European governments and instead work together to hold collective talks.

The directive follows a similar warning in July.
At that time, the Commerce Ministry advised China’s automakers not to invest in countries such as India and Turkey, and to be cautious with investments in Europe.

(With inputs from Reuters)

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Delhi based journalist pickled in journalism. Have reported from nine world capitals and almost all parts of India. Over the last three decades, I have worked for India’s mainstream English dailies and contributed to All India Radio, Doordarshan and Women’s Feature Service. Also worked for international media including Japan’s leading newspaper, The Asahi Shimbun and done assignments for The Sunday Times, London, The Telegraph, The Guardian and the Canadian Broadcasting Corporation. Worked in the Embassy of France in New Delhi and can speak French to save my life. Write on Diplomacy, Politics and the social sector. Love Nature, heritage, Nature, animals and vintage cars. Enjoy cycling and playing badminton.