China Halts Investment in EU

SHANGHAI (Reuters) – China has instructed its automakers to cease significant investments in European nations supporting extra tariffs on Chinese-built electric vehicles, two sources briefed about the matter revealed. This development is likely to further divide Europe.

The new European Union tariffs, reaching up to 45.3%, took effect this Wednesday after a year-long investigation that divided the bloc, prompting retaliation from Beijing.

Ten EU member states, including France, Poland, and Italy, supported the tariffs in a recent vote, while five members, including Germany, opposed them, and twelve abstained.

During a meeting held by the Ministry of Commerce on October 10, Chinese automakers such as BYD, SAIC, and Geely were advised to pause major investment plans, like establishing factories in countries that supported the tariffs. The sources requested anonymity as the meeting was not public.

Several foreign automakers participated in the same meeting, where attendees were cautioned about investments in abstaining countries and were "encouraged" to consider investing in those that opposed the tariffs.

Geely declined to comment, while SAIC, BYD, and the commerce ministry did not respond immediately.

Countries like Italy and France have attracted Chinese automakers for investments but also warned about the risks of a surge of inexpensive Chinese EVs affecting European manufacturers.

State-owned SAIC, China’s second-largest auto exporter, is selecting a site for an EV factory in Europe and plans to open its second European parts center in France this year to meet the demand for its MG-brand cars.

The French government has not responded to requests for comment.

The Italian government is in discussions with Chery, China’s largest exporter, along with other Chinese automakers, including Dongfeng Motor, regarding potential investments.

Italy's industry ministry declined to comment. Dongfeng and Chery have not yet responded.

BYD is currently constructing a plant in Hungary, which opposed the tariffs. The Chinese EV giant is also contemplating moving its European headquarters from the Netherlands to Hungary due to cost issues, according to two informed sources.

Even prior to Beijing's guidance, Chinese companies have been cautious about establishing production facilities in Europe due to the substantial investments and the need for a comprehensive understanding of local laws and culture.

During the October 10 meeting, automakers were warned to avoid separate investment discussions with various European governments and instead pursue collective talks. This directive follows a similar warning issued in July, where the commerce ministry advised Chinese automakers against investing in nations like India and Turkey and to proceed cautiously in Europe.