European Nations competes for Chinese EV factories amid tariff talks

European countries are vying for the lucrative opportunity to host Chinese electric vehicle (EV) factories, despite the European Union’s (EU) ongoing investigation into Chinese auto subsidies and the potential for new tariffs.

As the EU weighs the imposition of tariffs on Chinese EV imports, nations across the continent are offering their incentives to attract Chinese automakers. “Chinese automakers know their cars must be perceived as European if they want to attract European customers,” explained Gianluca Di Loreto, a partner at Bain & Company. “This means producing in Europe.”

Chinese EV giants, including BYD and Chery, are actively considering establishing second plants in Europe, while state-owned SAIC Motor has shortlisted locations for two additional factories. The race to secure these investments highlights the delicate balance between protecting local industries and embracing foreign investment.

In 2023, Chinese-brand cars accounted for 4% of the European market, with projections from consulting firm AlixPartners suggesting this could rise to 7% by 2028. Hungary, which produced approximately 500,000 vehicles last year, has already secured the first European factory investment by BYD. This EV giant is also considering opening a second plant in Europe by 2025.

Hungary is not stopping there; local media reports indicate ongoing negotiations with Great Wall Motor for its first European plant. The country is offering substantial incentives, including job creation grants, tax breaks, and relaxed regulations in targeted zones.

The EU’s tariff decision, expected this week, could significantly impact these developments. While import taxes might help European automakers compete more effectively, they could also accelerate the efforts of Chinese manufacturers already committed to the European market.

As the competition intensifies, European governments are caught between the desire to protect their domestic industries and the allure of new jobs and investments brought by Chinese EV manufacturers.

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