Analysis: Spain courts Chinese firms but looks to EU for ground rules

Chery Automobile

31/07/2026 06:00

    * Chinese EV, battery firms flock to invest in Spain's auto
sector
    * Deals involve varying terms on local employment, tech
transfer
    * Officials, industry seek EU backing for common standards
    * EU negotiating tougher trade measures in coming weeks

    By Victoria Waldersee
    MADRID, July 31 (Reuters) - As Spanish regions jostle to
draw Chinese battery and carmakers to produce on their turf,
many of the same players are also pushing Brussels to lock in
tough, EU-wide foreign investment rules to ensure Spain's
economy isn't harmed by a race to the bottom.
The two-pronged approach highlights the fine balancing act for
Europe in finding a strategy to deal with Chinese firms' surging
imports and ambitions to expand European production without
becoming a mere assembly site for Chinese technology.
    The stakes will rise in coming weeks as European Union
countries discuss hardening trade arrangements with Beijing.
"We are hugely worried for the future of industrial
manufacturing in Europe because we are not competitive with
China on any level," said Mikel Irujo, who heads business
development for the northwestern region of Navarre.
He and other Spanish officials are pushing the EU to speed up
passage of a 'Made in Europe' law mandating local content and
employment, technology transfer, and limited asset ownership for
foreign investors in strategic sectors.
    Some regions have attached such conditions for major
investments but for now there are no commonly agreed criteria,
and details of specific deals often remain undisclosed.
"[The Made in Europe law] is fundamental. We can't be competing
between member states - we need common norms for everyone," said
Juan Jose Picazo of CCOO industry union in Valencia, where
Chinese carmaker Geely signed a deal this week to take over
unused factory space in a Ford plant. 
        
    'GATEWAY TO EUROPE'    
    Autonomous communities from Catalonia to Extremadura have
declared an ambition to become China's "gateway to Europe",
setting up offices in China and China-focused teams in Spain to
court investors.
It is working. Carmakers SAIC, Chery and battery-makers CATL and
AESC are building EVs and batteries in Spain, alone or in joint
ventures with European firms. Some are revitalizing regions
where car plant closures left gaping holes in the labour market.
Others, including BYD and Hongqi, are eyeing sites. 
Spain produces the second-largest number of cars in Europe after
Germany, employing 600,000 people in the sector worth 10% of its
GDP — but it lacks strong domestic brands, acting instead as a
manufacturing base for foreign carmakers.
That has made the country more open to auto investment from
China than Germany, where carmakers like Volkswagen  VOWG.DE ,
struggling with overcapacity, have nonetheless dismissed the
idea of Chinese competitors taking over plants.
    Spain's "more open, pragmatic and accessible market than
other European countries" appeals to Chinese firms, said Estela
Li, head of KPMG Spain's China practice.
"It is evident the autos sector will change. Adapting will allow
us to have many more years of production," Jorge Azcon,
president of Aragon, told reporters in July of the approval of
CATL and Stellantis' joint battery plant in his region.
     
    'PRE-POSITIONING'
    With the specifics of the 'Made in Europe' legislation still
taking shape, Chinese investors were "pre-positioning
themselves" in friendly countries to keep options open,
according to Frank McCleary, partner at consultancy Arthur D.
Little, which works with auto firms across the region.
    As things stand, Spain requires investors from non-EU
countries in critical infrastructure and technologies to provide
a detailed picture of themselves and their planned investment.
    The screening form, a public document reviewed by Reuters,
includes questions on ownership structures, sources of
financing, past investment, outcomes of previous screening
processes, and regulatory or judicial penalties. Authorities
also request a three-year business plan, details of management,
and expected employment and investment commitments in Spain.
    Specific commitments on employment, local content or
sourcing, or technology transfer are set case-by-case with a
view to wider economic benefits, a government source said.
    "Spain is committed to attracting productive,
high-value-added investment that fosters technological
development, innovation, and quality employment while
establishing long-term local roots and contributing to more
secure and diversified supply chains," an economy ministry
spokesperson said.
    The government has also set up a Committee for Strategic
Investments to assess such deals more closely, which it aims to
launch in autumn.
     
    VARIED DEALS
    Deals struck so far have included varying commitments.
    CATL will bring up to 1,700 Chinese staff to construct its
battery plant in Zaragoza but plans to hire and train 4,000
Spanish workers to operate it, the company said. Its investment
agreement did not include commitments on local sourcing, but it
intends to source over 70% EU content once at full capacity,
they added.
In documents seen by Reuters, AESC Battery Spain, majority owned
by China's Envision Group, committed to 40% European employment,
40% Spanish management, and worker training programmes for its
plant in Extremadura by 2030. The documents did not include
signatures but company sources confirmed they had been signed. 
    In Galicia, where SAIC will build its first European plant,
a regional government spokesperson said matters of employment
and sourcing were not in the agreement and would be left to the
Made-In-Europe law to regulate.
    However those new investment rules pan out, Spain's courting
of Chinese firms will continue.
 "This isn't about good versus bad," said Navarre region's
Irujo, who in the past year has made five business trips to
China, scoring a 400-million-euro ($460 million) investment from
cathode maker Hithium in the process.
     "We just want them to locate production in Europe."
     
    ($1 = 0.8681 euros)

(Reporting by Victoria Waldersee, additional reporting by Nick
Carey; Editing by Mark John and Toby Chopra)
((mailto:Victoria.Waldersee@thomsonreuters.com;))