Dongfeng, Chery lead Chinese carmakers in eying Europe factories amid brutal price war at home

Dongfeng is mulling setting up a plant in Italy, while Chery will build its first European plant in Barcelona’s Zona Franca industrial zone
Trend shows Chinese EV makers ‘are playing a leading role in the transition of the global automotive industry,’ says analyst in Shanghai

Electric & new energy vehicles

Daniel Renin Shanghai

Published: 8:32pm, 17 Apr 2024

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Chinese carmakers are eyeing production sites in Europe to assemble the next generation of electric vehicles (EVs) as a foil against the EU’s protectionist tariffs as a brutal price war at home drives more producers offshore in search of fresh markets.

Dongfeng Motor, the Chinese partner of Japan’s Nissan Motor and France’s Renault, is considering setting up a plant in Italy, Bloomberg reported. Chery Automobile, meanwhile, has sealed a deal to build its first European factory in Barcelona’s Zona Franca industrial zone in northeastern Spain with Ebro-EV Motors, according to a company statement.

“The plant construction plans reflect the fact Chinese EV assemblers are playing a leading role in the transition of the global automotive industry,” said Chen Jinzhu, CEO of consultancy Shanghai Mingliang Auto Service. “European markets are attractive to many Chinese EV assemblers.”

Dongfeng, headquartered in Wuhan, the capital of central China’s Hubei province, is in talks with the Italian government to establish a factory with an annual capacity of more than 100,000 units, according to Bloomberg, which cited Xie Qian, head of the company’s European operations.

State-owned Chery, based in East China’s Anhui province, has reached an agreement with its Spanish partner to build its Omoda branded vehicles, two months after it started selling the cars in the country.

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China’s BYD overtakes Tesla as world’s largest EV maker

According to a statement from Spain’s Ministry of Industry and Tourism on Tuesday, the deal is expected to be signed on Wednesday in Madrid. Ebro-EV said it would own the majority of the venture.

Dongfeng and Chery are following in the footsteps of BYD, the world’s largest electric car maker, by localising their production in Europe as China’s international heft in EV design and manufacturing increases.

Shenzhen-based BYD said in December it would build a plant in Hungary to reinforce its go-global drive amid worries about additional tariffs likely to be levied on Chinese-made cars.

The European Commission launched an investigation into foreign state subsidies last September, and is expected to impose tariffs higher than the standard rate of 10 per cent on Chinese-made EVs.

Currently, six out of 10 new electric cars worldwide are sold in mainland China.

UBS predicted in September that cars made in China, benefiting from a faster pace of electrification than most other countries, will control 33 per cent of the global market by 2030, up from 17 per cent last year.

The Swiss bank said in a report that BYD has a production advantage over Tesla in both mainland China and Europe. The cost of manufacturing a BYD Seal sedan, a potential rival to the comparable Model 3, is 25 per cent lower in Europe, it added.

Dongfeng’s EV unit, Voyah, said on Wednesday that it would tap a clutch of South European markets, from Germany to Spain and Italy, by exporting more of its vehicles to them.

On Wednesday, Chery formed a partnership with UK car rental company Octopus Electric Vehicles, which will allow its Omoda EVs to be leased out to local customers.

The tie-up between Octopus and Chery came just a month after the UK company signed a preliminary agreement with BYD to buy 5,000 of its cars.

In China, BYD kicked off a discount war on February 18, cutting the prices of nearly all of its cars by 5 to 20 per cent as sales in the world’s largest EV market showed signs of slowing.

Cui Dongshu, general secretary of the China Passenger Car Association, said in February that most carmakers were likely to continue offering discounts to retain market share, which could reshape the domestic market.