China has told its auto makers to halt big investment in European countries that support extra tariffs on Chinese-built electric vehicles, two people briefed about the matter said, a move likely to further divide Europe.
The new European Union tariffs of up to 45.3 per cent came into effect on Wednesday after a year-long investigation that divided the bloc and prompted retaliation from Beijing.
Ten EU members including France, Poland and Italy supported tariffs in a vote this month, in which five members including Germany opposed them and 12 abstained.
As Beijing continues negotiations over an alternative to tariffs, Chinese auto makers including BYD, SAIC , and Geely were told at a meeting held by the Ministry of Commerce on Oct. 10 that they should pause their heavy asset investment plans such as factories in countries that backed the proposal, said the people.
They declined to be named, as the meeting was not public.
Several foreign auto makers also attended the meeting, where the participants were told to be prudent about their investments in countries that abstained from voting and were “encouraged” to invest in those that voted against the tariffs, the people said.
Geely declined to comment. SAIC, BYD and the commerce ministry did not immediately reply to requests for comment.
Italy and France are among EU countries that have been courting Chinese auto makers for investments, but they have also warned of the risks that a flood of cheap Chinese EVs pose to European manufacturers.
State-owned SAIC, China’s second-largest auto exporter, is choosing a site for an EV factory in Europe and has been separately planning to open its second European parts centre in France this year to meet growing demand for its MG-brand cars.
An aide to France’s junior trade minister Sophie Primas said they had no comment to make ahead of her trip to China next week.
The Italian government is in talks with Chery, China’s largest auto maker by exports, and other Chinese auto makers, including Dongfeng Motor, about potential investments.
Italy’s industry ministry declined to comment. Dongfeng and Chery didn’t immediately respond.
BYD is building a plant in Hungary, which voted against the tariffs. The Chinese EV giant has also been considering relocating its European headquarters from the Netherlands to Hungary due to cost concerns, two separate people with knowledge of the matter said.
Even before Beijing issued its guidance, Chinese companies were cautious about independently setting up production sites in Europe, as it requires large sums of investment and a deep understanding of local laws and culture.
The auto makers were also told at the Oct. 10 meeting that they should avoid separate investment discussions with European governments and instead work together to hold collective talks, the people said.
