Focus: European nations compete for Chinese EV factories, jobs even as EU weighs tariffs

Samsung SDI

10/06/2024 07:00

* 
      As EU probes China auto subsidies, European nations offer
their
own incentives to land factories
    

        * 
      China EV giants BYD, Chery consider second plants in
Europe
    

        * 
      State-owned SAIC has location shortlist for two plants in
the
region
    

  
    By Giulio Piovaccari
       MILAN, June 10 (Reuters) - European governments may be
wary of budget Chinese electric vehicles flooding their markets
but they're also fiercely competing for a share of the
manufacturing investment and jobs the new competitors bring.
    While the European Union investigates China's auto subsidies
and considers tariffs on imports, national governments across
the bloc are dangling their own incentives to attract Chinese
automakers looking to build European factories.
    Manufacturing costs for Chinese EV makers including BYD
 002594.SZ , Chery Automobile  CHERY.UL  and state-owned SAIC
Motor  600104.SZ  are much lower at home but they are
nonetheless keen to set up in Europe to build their brands and
save on shipping and potential tariffs, said Gianluca Di Loreto,
a partner at consultancy firm Bain & Company.
    "Chinese automakers know their cars must be perceived as
European if they want to bear interest among European
customers," he said. "This means producing in Europe."
    The EU tariff decision is expected this week. On one hand,
import taxes could help European automakers better compete with
their Chinese counterparts, but they may also spur on Chinese
automakers which are already investing heavily, and for the
long-term, in Europe. 
    Sales of Chinese-brand cars comprised 4% of the European
market last year and are forecast to hit 7% by 2028, according
to consulting firm AlixPartners.
    Hungary, which produced around 500,000 vehicles in 2023,
secured the first European-factory investment by a Chinese
automaker, announced last year by EV giant BYD which is also
considering a second European plant in 2025.
    Budapest is also negotiating with Great Wall Motor
 601633.SS  for its first European plant, local media have
reported, with the country offering cash for jobs creation, tax
breaks and relaxed regulation in targeted zones to attract
foreign investment.
    Hungary has spent more than $1 billion in recent years to
support new battery plants of South Korean groups SK On and
Samsung SDI  006400.KS  and Chinese battery giant CATL's
 300750.SZ  planned factory.
    Representatives of BYD, Great Wall and Hungary did not
respond to requests for comment.
    China's Leapmotor  9863.HK  will use existing capacity of
Franco-Italian partner Stellantis  STLAM.MI , with Reuters
reporting the pair have chosen the Tychy plant in Poland as a
manufacturing base.
    Poland has a number of programmes currently supporting more
than $10 billion of investments, the country's development and
technology ministry told Reuters, including one favouring the
transition to a net-zero economy and another offering corporate
income tax relief, of as much as 50% in high-unemployment
regions.
    
    SPAIN, ITALY CHASE EV FACTORIES
    Spain, Europe's second largest car-making country after
Germany, has secured investment from Chery, which will start
production in the fourth quarter at a former Nissan facility in
Barcelona with a local partner.
    Chery is expected to benefit from Spain's 3.7 billion-euro
programme launched in 2020 to attract electric-vehicle and
battery plants.
    China's Envision Group has already received 300 million
euros in incentives under the scheme for a 2.5 billion battery
plant creating 3,000 jobs. Spain might also host Stellantis'
planned fourth gigafactory in Europe, with CATL.
    Chery plans a second, larger facility in Europe, a source
with knowledge of the company's plans told Reuters, and has held
talks with governments including Rome, which is keen to attract
a second automaker to rival Fiat-maker Stellantis.
    Italy can tap its national automotive fund, worth 6 billion
euros between 2025-2030, for incentives for both car buyers and
manufacturers. China's Dongfeng  0489.HK  is among several other
automakers that have held investment discussions with Rome.
    Italy's industry ministry declined to comment. Dongfeng and
Chery did not respond to requests for comment.
    SAIC, owner of the venerable MG brand, aims to build two
Europe plants, two sources familiar with the matter told
Reuters.
    The first, based at an existing facility, could be announced
as early as July and would employ a kit-assembly technique,
targeting annual production of up to 50,000 vehicles, one of the
sources said. SAIC's second European plant would be built from
scratch and produce up to 200,000 vehicles annually, the source
added.
    Germany, Italy, Spain and Hungary were on SAIC's location
shortlist, the source said.
    SAIC did not respond to a request for comment.
    
    
        
    CONTROLLING COSTS IN EUROPE
    In Europe, Chinese automakers face higher costs for 
everything from labour to energy to regulatory compliance.
    But costs for exporting made-in-China cars can add up
quickly and threaten already narrow margins.
    Bain & Company's Di Loreto said a 15,000-euro car produced
in China requires shipping-and-logistics costs of between 500
and 3,000 euros.
    Chinese automakers may find labour costs in Northern Europe
too high for competitive production, Di Loreto said, whereas
further south, Italy or Spain offer a balance of lower labour
costs and relatively high manufacturing standards - particularly
important for premium vehicles.
    For lower-cost vehicles, Di Loreto said, attractive
locations include Eastern Europe and Turkey, which currently
produces around 1.5 million cars annually, mostly for the EU,
and has held talks  with BYD, Chery, SAIC and Great Wall.
    Turkey's customs union with the EU and free trade deals with
non-EU countries guarantee tariff-free vehicle and component
exports.

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GRAPHIC Chinese car exports soared by more than 50% in 2023    https://reut.rs/4bKSMZy
FACTBOX-Companies invest in EV battery factories in Europe   
 urn:newsml:reuters.com:*:nL8N3795LT
FACTBOX-Chinese EV makers' plans to make cars in Europe   
 urn:newsml:reuters.com:*:nL8N3H66B6
FACTBOX-EU probes on Chinese subsidies and imports   
 urn:newsml:reuters.com:*:nL8N3H80AT
GRAPHIC: China's auto exports by European country    https://reut.rs/4aUn2Qr
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 (Reporting by Giulio Piovaccari; additional reporting by
Giuseppe Fonte in Rome, Gilles Guillaume in Paris, Joan Faus in
Barcelona, Anita Komuves in Budapest, Anna Koper and Marek
Strzelecki in Warsaw and Can Sezer in Istanbul; writing by
Giulio Piovaccari; editing by Brian Thevenot, Kirsten Donovan)
 ((giulio.piovaccari@thomsonreuters.com))