China's EU-made vehicles threaten local OEMs

THE expansion of Chinese electric vehicle manufacture into Europe will on one hand assist Chinese OEMs in skirting the region’s recently-imposed importation tariffs. On the other, it may well place at risk established European marques already struggling to compete with a new generation of cheaper Chinese imports.

A report published in Automotive News Europe this week suggests the arrival of China’s electric vehicle manufacturers is a risk for stalwart European OEMs, “which have little choice but to strike partnerships and make space for their upstart rivals”.

Spain will soon build the Chery Omoda E5 at the former Nissan plant in Barcelona, with a second European manufacturing site on the radar.

In partnership with Spain’s Ebro, the OEM is targeting annual production numbers of 150,000 units while at the same time developing its own research and development and manufacturing and distribution hubs “to become a truly European company”.

“We are determined to move ahead with our launch team, with our operation in Europe in the short-, medium-, and long-term,” said Chery of Europe president Charlie Zhang.

Initially, Chery will assemble vehicles from partially knocked down kits before establishing its own manufacturing presence in Spain. The process will allow Chery to avoid EU tariffs imposed on the importation of finished cars.

The European Commission is still working out how the new tariffs will apply to joint ventures that were not part of its anti-subsidy investigation. While talks could stave off the additional duties before they are made permanent in November, China has already begun a retaliatory probe into the alleged dumping of pork products from the EU.

It is just one strand of a wider global trade dispute, ANE reports. The US has imposed tariffs on Chinese electric vehicle imports as high as 100 per cent, as the world’s two largest economies spar over an industry that has grown rapidly on the back of Beijing’s subsidies.

Indeed, in building on European soil, Chinese manufacturers are finding a workaround of the EU’s tariffs in a move that will not only improve profitability, but also market share. Over time, the decision to build locally will save OEMs money – and save customers thousands of euros on each vehicle they purchase.

In added benefit to the region, the production of vehicles means additional scope for component manufacturers – including high-voltage battery producers already establishing footholds in Europe.

And it’s not just Geely that is ahead of the game…

SAIC, which owns MG Motor, is also expected to announce a decision on European production soon, the company believe to be in talks with the Spanish government on a potential site for its first European production facility.

Others are currently courting Italian governments, including Anhui Jianghuai Automobile Group and Dongfeng Motor Group. BYD will shortly enter Hungary and Turkey, while Leapmotor will soon produce its T03 hatch in Tychy, Poland.

Speaking on the rise on vehicle production by Chinese firms in Europe this week, Stellantis CEO Carlos Tavares said he is concerned about the expansion despite his own company’s partnership with China’s Leapmotor.

“All European governments are dating Chinese car makers to come to assemble their vehicles in their countries,” he said. “Italy, France, Germany, Spain, they are all dating the Chinese. We are here for the fight.”

And it’s a fight they might well have to face. AlixPartners partner and managing director Alexandre Marian told ANE that Chinese OEMs will continue expanding in Europe, potentially acquiring plants that local manufacturers wish to close or sell.

“Chinese manufacturers are extremely determined,” he said. “They always find a way around a problem and once they have fixed a target, they find a way to make that target.”