European governments are competing to attract Chinese electric vehicle (EV) manufacturers, despite concerns about budget Chinese EVs entering their markets, Reuters reported on Monday. While the European Union investigates China's auto subsidies and contemplates import tariffs, individual European nations are offering incentives to Chinese automakers like BYD, Chery Automobile, and SAIC Motor to establish factories in Europe. Despite lower manufacturing costs in China, these automakers are keen to set up shop in Europe to enhance their brands and save on shipping and potential tariffs. The EU's tariff decision, expected this week, could help European automakers compete with their Chinese counterparts but may also encourage Chinese automakers, who are already heavily investing in Europe. Sales of Chinese-brand cars made up 4 per cent of the European market last year and are projected to reach 7 per cent by 2028. However, Chinese automakers face higher costs in Europe, from labour to energy to regulatory compliance. For instance, a €15,000 car produced in China incurs shipping and logistics costs of between €500 and €3,000. Chinese automakers may find labour costs in Northern Europe too high for competitive production, but Italy or Spain offer a balance of lower labour costs and relatively high manufacturing standards. For lower-cost vehicles, Eastern Europe and Turkey, which currently produce around 1.5 million cars annually for the EU, are attractive locations. Turkey's customs union with the EU and free trade deals with non-EU countries ensure tariff-free vehicle and component exports.
