China Urges Automakers To Stop Investment In EU Countries Amidst Trade War

As we have reported over the last year, EU authorities have been doing everything in their power to stifle EV production based in China, fearing that the lower cost models coming from the east are warping the European market and putting domestic producers at a disadvantage.

Now as part of its ongoing jousting with European regulators, China is now telling its automakers to pause investment in EU countries. 

China has instructed its automakers to halt major investments in European countries supporting higher tariffs on Chinese-made EVs, according to Reuters. This follows the EU’s new tariffs of up to 45.3%, implemented after a year-long inquiry that split the bloc and provoked Beijing’s response.

During an Oct. 10 meeting held by China’s Ministry of Commerce, automakers like BYD, SAIC, and Geely were advised to pause large investments in countries backing the tariffs. Foreign carmakers attending the meeting were also encouraged to invest in EU nations that opposed the tariff plan, while exercising caution in those that abstained.

Recall days ago Chinese battery company SVOLT shuttered its operations in Europe. Chinese EV battery maker SVOLT Energy plans to shut its European operations by January 2025, in a move that clearly points to China’s retreat from the market - and declining EV sales in Europe, according to Nikkei. 

SVOLT, linked to Great Wall Motor, will close its German subsidiaries and lay off staff, according to a source.

Poor EV sales and financial pressures have driven Chinese battery maker SVOLT to shut all of its European operations, including its Frankfurt office, according to the same report.

The Reuters report says that the move suggests "the government is seeking leverage in talks with the EU over an alternative to tariffs". 

Which makes sense because hours before this news broke it was reported that the European Union was sending officials to Beijing for further talks to explore alternatives to tariffs on Chinese electric vehicles. 

Reaching a deal to replace the new tariffs remains complex, with plans still in development but the two sides are examining a "price undertakings" agreement to regulate export prices and volumes as an alternative to tariffs.

Bloomberg writes that after eight rounds of talks, the proposals on the table still fall short of EU standards, including WTO compliance and enforceability requirements.

Negotiators have recently made progress, considering ways to simplify terms for potential price undertakings, particularly for new EV models not yet exported. One focus is preventing cross-compensation, where EV pricing deals might be offset by sales of hybrids or other goods.

However, another challenge is China’s insistence on a single umbrella deal for all manufacturers, managed by a national trade group representing key exporters, like SAIC Motor and BMW Brilliance.

Recall, we wrote just days ago that Chinese EV makers were having a bang-up end of the year regardless. China's major EV makers ended Q3 stronger than last year, with solid deliveries reducing the need for discounts.