Localization of production is expected to allow Chinese EV makers to avoid EU import tariffs
Chinese officials and car manufacturers could buy German factories that are expected to shut down, and are particularly interested in plants belonging to Volkswagen, according to a source with knowledge of Beijing’s assessment of the situation, as quoted by Reuters.
Beijing believes launching local production in Germany will help it boost its influence in the country’s highly-rated automotive sector, the source told the news agency on Thursday. Moreover, Chinese producers of electric vehicles (EVs) would be able to avoid import tariffs when selling cars in the EU, Reuters noted.
In October 2023, the European Commission initiated an anti-subsidy probe into imports of passenger battery electric vehicles from China. A year later, the bloc’s executive branch hiked import duties on these vehicles to more than 45%.
In response, Chinese authorities introduced provisional tariffs on EU-origin brandy and threatened higher tariffs on fuel-powered cars with large-displacement engines. Beijing has also filed a lawsuit with the World Trade Organization (WTO), alleging Brussels was engaging in “trade protectionism.”
Chinese businesses have invested across a wide range of sectors in Germany, the EU’s economic powerhouse, ranging from telecommunications to robotics. Mercedes-Benz currently has two major shareholders from the People’s Republic.
The source told Reuters that investment decisions would hinge to a great degree on the new German government’s stance towards China following the election scheduled for February 23.
Last year, Volkswagen announced plans to shut down at least three of its production sites in its home country, lay off thousands of workers and cut pay by 10%. Later, the world’s second-biggest automaker by output and German union IG Metall reached a deal to avoid involuntary redundancies and plant closures in the country until 2030.
At the time, Daniela Cavallo, Volkswagen’s works council head, urged the German authorities to come up with a plan to ensure that the country’s economy does not “go down the drain.”
The carmaker, along with other companies across the EU, has been hit by the global economic slowdown that sent demand for their products falling, as well as the transition to green technologies.
