This is the next logical step. The European market finds – or is forced to find – its appetite for electric mobility, to the point that, as of August 2023, one in five registered cars is zero-emission. Chinese manufacturers are able to offer a product of similar quality at a considerably more affordable price and their market share today reaches 5.7% of sales so far this year.
Brands like MG are beginning to make a name for themselves, becoming the best-selling model in Spain in August – specifically, the ZS, available in electric and combustion versions; others, such as BYD, threaten to take the first place in electric registrations from Tesla: at the end of the third quarter, the American had sold 435,059 units, while the Chinese added 431,603. Only 3,456 vehicles difference.
Meanwhile, the European Commission has launched an investigation to determine whether there are “unfair practices”, in a market “flooded by electric vehicles whose price is kept artificially low by enormous state subsidies”, all in the words of the community president, Ursula von der Leyen, in his last State of the European Union speech, on September 13.
It is still early to know the conclusions of the investigation and the commercial consequences – not to mention the possible repercussions from China – that it may entail, but a tariff increase beyond the current 10% would make producing in the European Union more attractive than import.
Since the Chinese manufacturers are aware. This is the case of Chery Holding, which has been exporting vehicles since 2001 and knows that one of the most effective ways to avoid tariffs is through CKD factories: assembly lines that assemble the parts of the vehicles they receive. So much so that they already have 10 plants of this type in countries such as Malaysia, Brazil or Iraq and have already made the decision to create one in Europe.
In the words of the CEO of Omoda, the first Chery Group brand to reach the Old Continent via Spain, Shawn Xu, “the cost of operating a CKD plant is high, but it allows savings in transportation and logistics.”
Spain, hopeful
Our country is one of those that the Chinese builder is considering to establish a production center, from which “it would even be possible to export to more markets.” In November 2022, an international Chery delegation visited several European countries to study the location of the plant. After passing through Germany, France, Italy and Romania, they met with representatives of the Generalitat of Catalonia to consider occupying the facilities of the former Nissan factory in Zona Franca, Barcelona.
Months later, in April of this year, Chery signed a memorandum of understanding to “study the production of 50,000 vehicles per year.” Without being a firm decision, the CEO of the Chery Group, Zhang Guibing, stated that “Barcelona has good connections and has a factory that is disused. However, the cost of creating a factory is high and it is not a decision that can be made lightly.
The fact that no progress has been made beyond the signing of the document seven months ago – even with the decision to open the Spanish market commercially – may be a gloomy sign. The final decision on the location will be made “at the end of 2023, with the start of operations scheduled for the end of 2024 or beginning of 2025.”
Another manufacturer considering opening a factory in Europe is SAIC Motor, the parent company of the MG brand. This English emblem went bankrupt after the 2008 crisis and, after being acquired, its production was taken to China in 2016. Last July, the president of the European subsidiary, William Wang, stated that the brand was studying producing in Europe «despite higher costs. When more than 200,000 cars are sold a year, it is time. MG registered 99,789 units in the first half of the year and will make the decision in the next two years.
French shield
Manufacturing in Europe would also mean avoiding the protectionist mechanism that France has designed: awarding subsidies to electric vehicles based on their carbon footprint in production and transportation.
Since much of China’s energy still comes from coal, the French government has found a way to circumvent restrictions on the WTO’s protectionist policies. Italy is considering adopting a similar measure.
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