China tells carmakers to pause investment in EU countries backing EV tariffs, Reuters reports

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China tells carmakers to pause investment in EU countries backing EV tariffs, Reuters reports

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

Nick Carey | Reuters

China has told its automakers to halt big investment in ********* countries that support extra tariffs on ********-built electric vehicles, two people briefed about the matter said, a move likely to further divide Europe.

The new ********* Union tariffs of up to 45.3% came into effect on Wednesday after a year-long investigation that divided the bloc and prompted retaliation from Beijing.

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.

******** automakers including BYD, SAIC, and Geely were told at a meeting held by the Ministry of Commerce on Oct. 10 that they should pause their heavy asset investment plans such as factories in countries that backed the proposal, said the people.

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

Several foreign automakers also attended the meeting, where the participants were told to be prudent about their investments in countries that abstained from voting and were “encouraged” to invest in those that voted against the tariffs, the people said.

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

The move by ******** 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 ********-made EVs in the ******* States and Canada, a drop in EV exports to Europe would risk deepening overcapacity ******** automakers face in their home market.

During a visit to China by Spanish Prime Minister Pedro Sanchez last month, a ******** 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 ******** automakers for investments, but they have also warned of the risks that a flood of cheap ******** EVs pose to ********* manufacturers.

State-owned SAIC, China’s second-largest auto exporter, is choosing a site for an EV factory in Europe and has been separately planning to open its second ********* parts center 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.

The Italian government is in talks with Chery, China’s largest automaker by exports, and other ******** 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 is building a plant in Hungary, which voted against the tariffs. The ******** EV giant has also been considering relocating its ********* headquarters from the Netherlands to Hungary due to cost concerns, two separate people with knowledge of the matter said.

Even before Beijing issued its guidance, ******** companies were cautious about independently setting up production sites in Europe, as it requires large sums of investment and a deep understanding of local laws and culture.

The automakers were also told at the Oct. 10 meeting that they should avoid separate investment discussions with ********* governments and instead work together to hold collective talks, the people said.

The directive follows a similar warning in July when 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.

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