Chinese carmakers gear up European production to sidestep tariffs, import quota

Chinese automotive manufacturers are preparing to increase local production in Europe to bypass an upcoming EU import quota targeting their hybrid electric vehicles (EVs) and high tariffs imposed on pure EVs. Seeking to capitalize on a growing market, Chinese EV leaders with the necessary scale and manufacturing plans aim to shift their production footprint from a single export channel to a multi-market landscape.

On October 9, China and the EU agreed on a trade understanding that would impose an annual quota of 350,000 imported Chinese-made hybrid vehicles, with the number increasing by 6% per year for the next four years. Chinese manufacturers are considering either building new factories or leveraging idle ones in Europe. Changan Automobile, a state-owned manufacturer, plans to produce 180,000 units in the EU by 2028 through a partnership with a local entity, aiming to expand that capacity to 300,000 cars annually by 2030.

Byd, the world's largest EV manufacturer, is also eyeing factories in France and Spain, while Stellantis has partnered with Leapmotor, a Chinese EV maker, to establish an EV production line in a Spanish factory. Geely Auto, China's second-largest automaker, recently signed a deal with Ford to use its Spanish plant for EV production.

Analysts warn that the EU's import quota and tariffs on Chinese EVs could negatively impact Chinese manufacturers and disrupt trade relations between the two economies.