European countries scramble to attract Chinese electric car investments

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European governments may be wary of budget Chinese electric vehicles flooding their markets but they are also fiercely competing for a share of the manufacturing investment and jobs the new competitors bring.

Manufacturing costs for Chinese EV makers including BYD, Chery Automobile and state-owned SAIC Motor 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.

Meanwhile, Volvo has started to shift manufacturing of Chinese-made electric vehicles to Belgium as the EU prepares to impose tariffs on China-made EVs, the Times reported.

On top of transferring production of Volvo’s EX30 and EX90 models to Belgium, the carmaker may also move assembly of some Volvo models bound for the UK, the report said, citing unidentified people. 

Volvo, which is owned by Zhejiang Geely Holding Group, is seen as the most exposed among western automakers to the potential tariffs, the Times said.

The EU is expected to tell EV makers in China as early as this week on whether it will impose provisional tariffs from July 4 that would boost import duties above the current level of 10%.

Volvo Car denied the Times report, saying “it’s premature to speculate on the implications of what this investigation will conclude, or any potential measures.”

Reuters and Bloomberg