Summary
- China is encouraging its automakers to keep advanced electric vehicle technology within the country
- Chinese carmakers are being advised to send knock-down kits to their foreign plants for final assembly
- China’s Ministry of Commerce has instructed automakers not to invest in countries like India or Turkey without informing the Chinese government
- Chinese carmakers are looking to localize manufacturing to avoid tariffs on Chinese-made EVs
- Chinese companies are opening plants in the European Union to avoid duties, and must meet rules-of-origin requirements as per EU regulations
Article
China is advising its carmakers to keep advanced electric vehicle technology within the country while expanding their operations globally. This includes encouraging Chinese automakers to export knock-down kits to their foreign plants, where key parts of a vehicle are produced in China and then assembled in the destination market. Despite efforts to build factories in countries like Spain, Thailand, and Hungary to avoid tariffs on Chinese exports, Chinese carmakers have been instructed not to make auto-related investments in India and must notify the Ministry of Industry and Information Technology before investing in Turkey.
The Chinese Ministry of Commerce held a meeting with over a dozen automakers in July, where the guidelines regarding key production staying in China were discussed. This directive could potentially hinder Chinese carmakers’ efforts to globalize and find new customers to offset domestic competition and declining sales. It may also affect European nations trying to attract Chinese carmakers to boost their local economies. Chinese automakers have been establishing plants in the European Union to avoid duties, although European Commission Executive Vice President Valdis Dombrovskis has emphasized the need for substantial value creation and know-how within the EU.
In countries like Brazil, China-based carmakers have committed to increasing locally produced components to meet export requirements without tariffs. For example, BYD and Great Wall Motor Co. aim to enhance locally sourced components to fulfill Brazil’s trade agreements with other Latin American countries. Turkish politicians announced plans for BYD to construct a $1 billion plant in the country, offering improved access to the European Union due to Turkey’s customs-union agreement with the bloc. BYD is expected to benefit from this initiative, especially since Turkey imposed a 40% tariff on vehicle imports from China.
Chery Automobile, a Chinese automaker, has partnered with a local firm in Spain to reopen a plant previously operated by Nissan Motor Co. The Spanish plant will assemble cars from partially knocked-down kits, showcasing the company’s commitment to local production. The tensions between China and India have escalated since a deadly border clash in 2020, resulting in Chinese companies like SAIC Motor Corp., which owns MG Motor India, being investigated for financial irregularities. SAIC has reduced its stake in the Indian MG operation, indicating a shift in ownership structure.
Chinese EV stocks experienced fluctuations in response to these developments, with SAIC Motor falling in Shanghai and Geely Automobile Holdings Ltd. and BYD slightly down in Hong Kong. The Chinese government’s efforts to retain key production elements within China while expanding globally reflect the challenges faced by Chinese carmakers in navigating international trade barriers and regulatory risks. Despite their innovative and affordable EVs making inroads in foreign markets, Chinese automakers must balance global expansion with domestic interests in technology protection and competitiveness.
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