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European nations are in a race to attract Chinese electric vehicle factories while the EU deliberates tariffs. This competition underscores the significance of the EV market and the economic stakes involved. As countries vie for these factories, they aim to secure jobs and investment opportunities, shaping the future of automotive manufacturing in Europe. The outcome will not only impact individual nations but also influence the broader dynamics of global trade and economic policy.
Boston Brand Media brings you the latest news - European governments might express concerns about an influx of affordable Chinese electric vehicles saturating their markets, yet they are actively engaging in intense competition to secure a portion of the manufacturing investments and employment opportunities introduced by these emerging rivals. As the European Union examines China's automotive subsidies and contemplates imposing tariffs on imports, individual member states are offering their own enticing incentives to entice Chinese automakers seeking to establish manufacturing facilities within Europe.
Manufacturing expenses for Chinese electric vehicle manufacturers such as BYD, Chery Automobile, and state-owned SAIC Motor are notably lower within China. Nevertheless, these companies exhibit a strong interest in establishing a presence in Europe to enhance their brand recognition and mitigate expenses associated with shipping and possible tariffs. Gianluca Di Loreto, a partner at Bain & Company consultancy, emphasized that Chinese automakers understand the importance of positioning their vehicles as European-made to appeal to European consumers, necessitating production facilities within Europe.
The anticipated EU tariff verdict is imminent, with potential ramifications for both European and Chinese automakers. While import duties might offer European manufacturers a competitive edge aginst their Chinese counterparts, they could also accelerate the momentum of Chinese automakers, who are already making substantial investments in Europe for the foreseeable future. According to AlixPartners, Chinese-brand car sales accounted for 4% of the European market in the previous year and are projected to reach 7% by 2028, underscoring the increasing significance of these manufacturers in the region.
In 2023, Hungary, known for producing approximately 500,000 vehicles, successfully landed the inaugural European-factory investment from a Chinese automaker. EV behemoth BYD made this announcement last year and is contemplating a second European plant by 2025. Reports from local media suggest Budapest is currently in talks with Great Wall Motor for its inaugural European plant. To entice foreign investment, Hungary is offering incentives such as cash incentives for job creation, tax exemptions, and regulatory flexibility in specified zones.
Boston Brand Media also found that, Hungary has allocated over $1 billion in recent years to facilitate the establishment of new battery plants by South Korean firms SK On and Samsung SDI, as well as China's CATL, which has plans for a factory in the country. Despite these developments, representatives from BYD, Great Wall, and Hungary declined to comment on the matter.
Leapmotor of China intends to utilize the existing capacity of its Franco-Italian partner Stellantis, with reports indicating the selection of the Tychy plant in Poland as their manufacturing base. Poland is actively implementing several programs to support investments totaling more than $10 billion, including initiatives promoting the transition to a net-zero economy and providing corporate income tax relief of up to 50% in regions with high unemployment rates, according to the country's development and technology ministry as reported by Reuters.
Spain, ranked as Europe's second-largest car manufacturer after Germany, has secured investment from Chery. The production is set to commence in the fourth quarter at a former Nissan facility in Barcelona, in collaboration with a local partner. Chery stands to benefit from Spain's 3.7 billion-euro program initiated in 2020 to attract electric vehicle and battery plants. Additionally, China's Envision Group has received 300 million euros in incentives for a 2.5 billion-euro battery plant, generating 3,000 jobs. Spain is also a potential location for Stellantis' planned fourth gigafactory in Europe, along with CATL.
Chery intends to establish a second, larger facility in Europe, with Rome among the governments it has engaged in talks with, aiming to rival Fiat-maker Stellantis. Italy, equipped with a 6 billion-euro national automotive fund between 2025-2030, can offer incentives for both car buyers and manufacturers, attracting investment interest from automakers like Dongfeng. However, Italy's industry ministry declined to comment, and neither Dongfeng nor Chery responded to requests for comment. SAIC, the owner of the MG brand, plans to build two plants in Europe, with the first utilizing an existing facility and employing kit-assembly techniques for potential annual production of up to 50,000 vehicles.
The second plant, targeting annual production of up to 200,000 vehicles, would be constructed from scratch. SAIC considered Germany, Italy, Spain, and Hungary as potential locations for these plants. Nonetheless, SAIC did not provide any comment on these plans.
Chinese automakers operating in Europe contend with elevated expenses spanning labor, energy, and regulatory adherence. While exporting vehicles from China can rapidly accumulate costs, potentially jeopardizing already tight profit margins. According to Bain & Company's Di Loreto, shipping a 15,000-euro car from China entails logistical expenses ranging from 500 to 3,000 euros.
In Northern Europe, Chinese automakers may encounter prohibitively high labor costs, whereas nations like Italy or Spain offer a favorable balance of lower labor expenses and stringent manufacturing standards, especially crucial for premium vehicle production. Di Loreto highlights Eastern Europe and Turkey as appealing locations for lower-cost vehicle production.
Turkey, producing approximately 1.5 million cars annually, primarily for the EU market, has engaged in discussions with BYD, Chery, SAIC, and Great Wall. Its customs union with the EU and free trade agreements with non-EU nations ensure tariff-free exports of vehicles and components, making it an attractive manufacturing hub.
For questions or comments write to writers@bostonbrandmedia.com
Source: Reuters
