Increased tariff barriers can not stop the pace of Chinese car companies to enter the European market. Had the European Union to raise tariffs in Europe show a downturn in the Chinese car companies, is through localisation and other ways to re-layout the European market.
Recently, the German media kleinezeitung reported that from June this year, Magna’s factory in Graz, Austria, will begin to assemble the models of Xiaopeng and Guangzhou Automobile.
Borrow OEM to avoid tariffs
With the European Union imposing tariffs on Chinese-made electric cars under the pretext of ‘countervailing investigations,’ Chinese automakers have begun to look for different ways to break through the EU’s tariff barriers. Avoiding tariffs by using third-party OEM is one of the ways.
According to German media reports, Magna Steyr, a wholly owned subsidiary of Magna engaged in the OEM business, will use the SKD (semi bulk device assembly) model at its Graz plant in Austria to assemble cars for Xiaopeng and Guangzhou Automobile Group. Specifically, the two Chinese car companies will ship manufactured parts to Austria, and the Graz plant will only need to install a dozen or so core components, including axles and engines, so that the entire vehicle can complete final assembly in Europe.
This OEM model can be considered a win-win situation. For Chinese car companies such as Xiaopeng, producing cars locally in Europe can avoid tariffs. Currently, Xiaopeng’s and Guangzhou Auto’s electric cars exported to Europe are subject to a 20.7 percent countervailing duty, which, when stacked with the 10 percent base tariff, results in a total duty rate of 30.7 percent. If the SKD method is used to complete assembly in Europe, Chinese carmakers will only need to pay import tariffs on parts and components, which are usually less than 10 per cent, reducing costs significantly. In addition, according to the agreement, at the beginning of the cooperation, the two sides will only produce small batches of SKD models, so as to test the European market demand and control the risk. This strategy not only avoids the potential losses associated with large investments, but also accumulates data for subsequent market expansion.
For Magna, this is also its desire. As the automotive industry’s ‘OEM emperor’, Magna has long seen the opportunities behind the EU tariffs. In recent years, due to the downturn in the European auto market, Magna’s OEM business has been hit, and Magna Steyr even rumoured layoffs last year, saying the Graz plant was in a difficult situation. Co-operation with Chinese automakers is seen as an important attempt to develop new growth points.
Pushing for localised factories
Compared with car companies such as Xiaopeng and Guangqi, which chose to test the waters gradually, there are also some Chinese car companies that pursued the idea of going all the way and building factories directly, such as Chery and BYD.
Of course, Chery did not start from scratch to build a factory, but with the Spanish car company EV MOTORS cooperation, took over the former Nissan’s Spanish factory. In April last year, Chery and EV MOTORS signed a cooperation agreement to build an electric vehicle production base in Barcelona with ‘Chery technology + EBRO brand’ as the core. It is reported that EBRO is a legendary Spanish car brand, which was later acquired by EV MOTORS. Last November, Chery and EV MOTORS joint venture plant’s first product EBRO brand S700 off the line.
This initiative not only made Chery the first Chinese car company to produce cars in Europe, creating a precedent for Chinese car companies to participate in the revival of local brands in Europe in the role of technology exporter, but also created a large number of jobs and injected vitality into the local economy. At this year’s press conference of the Third Session of the 14th National People’s Congress, a spokesman strongly praised Chery’s Spanish project, calling it a typical example of cooperation between China and Spain.
In contrast, BYD has officially announced that it is building a wholly-owned plant in Hungary, and there are rumours that SAIC is also interested in building a plant in Europe.
Continue to explore the market
It’s worth noting that sales of Chinese-made electric cars in Europe have declined significantly due to tariffs imposed by the EU. However, it is clear that Chinese car companies will not easily give up such an important market. Not long ago, Xiaopeng Automobile announced that it had successfully entered the Polish, Swiss, Czech, and Slovak markets, and its Xiaopeng P7, Xiaopeng G9, and Xiaopeng G6 are scheduled to go on sale in the second quarter of 2025. Prior to this, Xiaopeng Auto has entered Norway, Denmark, Sweden, Germany, Belgium, France, Spain, the United Kingdom and other countries.
According to foreign media reports, Chery Automobile plans to take Poland as its first stop in the second half of this year, and gradually enter Hungary, Greece, the Czech Republic and Romania with the Tiggo brand, with the first product being the Tiggo 8 PHEV. In fact, some of the models in the Tiggo series have already been assembled and sold in Europe through licensing cooperation by other brands such as Spain’s EBRO and Italy’s DR Automobiles. Europe for assembly and sales. The Tiggo-branded models sold by Chery in Eastern Europe will be produced in China, with other models likely to be launched at a later stage.
In addition, despite the EU’s tariff hikes, which have hit a number of Chinese carmakers, including SAIC MG, some of them have still achieved positive growth, such as BYD. According to data from Bloomberg, in January this year, BYD achieved year-on-year growth of 551 per cent, 734 per cent and 207 per cent in the UK, Spain and Portugal respectively, with sales of 1,614, 1,192 and 392 units, all exceeding Tesla.
Recently, Charles Lester, data manager at Rho Motion Consulting, analysed in a report that during the period of November 2024-January 2025, sales of SAIC MG in Europe fell sharply due to the impact of EU tariffs, which also affected Dongfeng Honda, Tesla, Mercedes-Benz, Geely, Renault’s Dacia Springs, as well as Azure and Xiaopeng, among other car companies . However, he also said BYD expanded its market share in Europe and increased its global share despite the tariffs.
‘Despite the challenges faced by Chinese automakers in the European market, their global expansion remains strong, cementing China’s leadership in the electric vehicle industry.’ EconoTimes commented.
Source: China Automotive News
