The landscape of the European automotive industry is undergoing a significant transformation as Chinese electric vehicle (EV) manufacturers capitalize on opportunities arising from underutilized car factories across Europe. This strategic shift not only aims to bypass tariffs but also to establish a robust presence in the European market.
Chery, a prominent Chinese automaker, is set to commence EV production at a former Nissan facility in Barcelona, Spain, later this year. Additionally, discussions are underway for Chery to utilize Nissan’s Sunderland plant in England. Meanwhile, Geely is reportedly taking over part of a Ford facility in Valencia, Spain, and BYD, a key player in the global EV market, is in negotiations to acquire a section of Volkswagen’s Dresden plant in Germany.
This move marks a reversal of the trend seen in previous years, where established automakers set up manufacturing bases in China to serve the local market. Now, Chinese companies are producing vehicles in Europe to circumvent tariffs on imported cars, allowing them to offer competitive pricing.
European carmakers such as Volkswagen, Ford, and Nissan now face the challenge of maintaining their market position against Chinese competitors, who produce over half of the world’s EVs. “This is not just about filling idle capacity, it’s about embedding themselves into the European industrial ecosystem,” Bill Russo, founder of Automobility, stated in a conversation with Rest of World. “The winners will treat it that way.”
Chinese EVs face a 10% import duty in the EU, alongside a 17% anti-subsidy tariff, part of a broader set of levies that can reach 35.3%. By manufacturing within Europe, these tariffs are effectively avoided.
According to Felipe Munoz from Car Industry Analysis, Chinese brands sold 285,000 vehicles in Europe during the first quarter of this year, an 88% increase from the previous year, pushing their market share from 4.5% to over 8%. Their sales are rising more rapidly in developed markets like Europe than in emerging ones.
Empty European Factories
Many European factories are not closing but are instead seeing reduced production. Volkswagen plans to decrease its annual output in Germany by 734,000 vehicles over the next four years. Ford and Nissan are also scaling back production at their Cologne and Sunderland plants due to dwindling demand for combustion engines and unprofitable electric models.
Utilizing existing infrastructure is more cost-effective and faster than constructing new plants, as facilities, power, and skilled labor are already in place. Nissan’s potential agreement with Chery would allow for contract production of Chery’s vehicles on an underused line, offering Nissan a temporary solution amid declining European sales and financial constraints.
“This is an important step forward for our operations,” stated Massimiliano Messina, chairperson of Nissan’s Africa, Middle East, India, Europe, and Oceania region, to Rest of World. “We are looking forward to working with Chery International U.K. in the coming months to finalize a position that is optimal for both companies.”
In Germany, the most ambitious deal involves BYD potentially acquiring half of Volkswagen’s Dresden plant, a notable location where consumers could once observe their vehicles being manufactured through transparent walls. This move would position the world’s largest EV producer within Europe’s largest automobile market.
What European Carmakers Lose
European automakers risk losing more than just physical assets, warned Babak Hafezi, founder of HafeziCapital. A Chinese automaker that takes over a European factory also gains local employment, suppliers, and consumer acceptance, while the host company grows dependent on the technology controlled by its tenant.
The greatest risk is that European and Western automakers become dependent on Chinese platforms.”Babak Hafezi, founder of consultancy firm HafeziCapital
“The greatest risk is not that Chinese automakers buy European factories, given that factories are replaceable assets,” Hafezi explained to Rest of World. “The greatest risk is that European and Western automakers become dependent on Chinese platforms, software, batteries, and vehicle architecture while Chinese firms simultaneously gain local production, local labor, local suppliers, and local consumer legitimacy.”
Local production could soon lead to Chinese-branded vehicles being perceived as domestic, diminishing resistance as jobs become local and the narrative shifts to European-built Chinese brands, Hafezi noted.
However, some view these takeovers as a natural progression for companies expanding beyond their saturated home markets, according to Lei Xing, founder of AutoXing consultancy. Operating in unfamiliar territories poses challenges, but companies like BYD and Geely are well-positioned to succeed.
Western automakers face the critical question of keeping up with these developments. Once reliant on Chinese batteries, software, and supply chains, Western companies may lose control over their own products.
“It’s buying them time, but because they have walled off the entire Chinese supply chain, it’s going to be very hard for them to actually keep pace with Chinese competition,” commented John Helveston, an EV industry researcher at George Washington University.
Stephen Ezell of the Information Technology and Innovation Foundation advised European governments to block these partnerships, viewing them as temporary conveniences overshadowing a long-term threat. For established automakers, these agreements provide temporary economic relief, while the Chinese tenants secure a potentially permanent foothold.
“European policymakers should view Chinese EV competition as a foundational threat to Europe’s auto industry,” Ezell stated.
Original Story at restofworld.org