How Chinese Carmakers Are Racing to Produce in Europe Ahead of the Industrial Accelerator Act

Chinese carmakers have been investing heavily in the European market over recent years, and the payoff is already clear. If their market share in 2021 was almost negligible (0.5%), by the spring of this year it had climbed beyond 9%, with no sign of easing.

Tariffs, imports and the European Union’s tougher approach

Although some Chinese brands have started putting production on the ground in Europe (such as BYD), the reality is that, despite rising success, most manufacturers still bring the bulk of their cars into Europe directly from China. That leaves them exposed to customs duties of up to 45.3%.

And the European Union does not intend to stop at tariffs. Chinese manufacturers continue to be regarded as a threat to Europe’s car industry and, for that reason, the bloc has been signalling strengthened protectionist measures.

The Industrial Accelerator Act and tighter foreign-investment rules

One of the headline measures announced by the European Union is the Industrial Accelerator Act. This is a legislative proposal designed to safeguard European industry and jobs by placing stricter requirements on foreign investment. Specialists say the law could come into force as soon as the middle of next year.

What worries Chinese carmakers

It is precisely this proposal that has unsettled Chinese manufacturers. If the law goes ahead, any company looking to build a factory in Europe would have to meet a set of stringent conditions:

• Set up joint ventures in which the European partner holds the majority of control (Chinese brands cannot own more than 49%);
• Share and license intellectual property (technology and patents) with the European entity;
• Employ at least 50% European workers (the only non-negotiable rule);
• Use local suppliers and components.

Faced with this outlook, Chinese manufacturers see themselves in a race against the clock to establish a European presence before these requirements take effect.

Buying instead of building

Constructing a factory from scratch takes too long-time the Chinese carmakers do not have. As a result, the strategy gaining the most traction is to buy or partner with existing industrial sites that are underused or even idle.

Several manufacturers are already following that route. BYD, which built a new factory in Hungary and is building another in Turkey, is now actively looking for underutilised facilities in Italy and Spain.

Chery has purchased Nissan’s former plant in Barcelona and is in talks with the Japanese manufacturer about production in Sunderland (United Kingdom, where the Leaf and the Qashqai are currently built). Leapmotor will produce its models through a partnership with Stellantis in Madrid and Zaragoza, while Dongfeng is preparing to build its premium range at Stellantis’s Rennes plant. Geely, meanwhile, is negotiating to buy part of a Ford facility in Valencia.

SAIC, owner of MG, is set to open the group’s first factory within the European Union, in Galicia, with capacity for 120,000 vehicles per year. XPeng, it is understood, is in discussions with Volkswagen and other manufacturers about acquiring a European factory, but it already builds models at Magna Steyr’s facilities in Austria.

Quoted by Automotive News Europe, Jefferies analyst Philippe Houchois summed up the moment: “Chinese manufacturers have always aimed to produce in Europe, but they are now starting to realise that the opportunity may be becoming more limited.”

According to the same consultancy, taking known plans by Chinese manufacturers into account-and assuming they come to fruition-this could amount to more than two million cars produced on the European continent.