Trade conflict: China reportedly urges car manufacturers to stop EU expansion plans

The Chinese government is apparently exerting pressure on its car manufacturers to stop their expansion in the EU due to the trade conflict with the European Union over electric cars. This is said to involve, for example, the search for possible European plants in order to avoid EU tariffs by investing in Europe.

As Bloomberg reports, citing insiders, China’s government is calling on manufacturers to stop actively seeking production sites in the EU and signing new contracts while negotiations on EU tariffs on Chinese electric cars are still ongoing. It is a directive, not a binding order.

Nevertheless, such a ‘directive’ does not fail to have an effect, especially on state-owned car manufacturers. Dongfeng is said to have already cancelled plans for the possible production of cars in Italy. The company is said to have told Italian authorities that Italy’s support for EU tariffs on Chinese electric cars was the reason for the change of course.

Changan has also cancelled an event planned for this week in Milan for the market launch in Europe. Changan had planned to present its model portfolio and design philosophy to European media on Friday. Among other things, a speech by Zhu Huarong, Chairman of Changan Automobile, had been announced.

Reaction from private manufacturers

Bloomberg asked both car manufacturers and the Chinese Ministry of Commerce for a statement but received no response. Only the Italian Ministry of Industry has responded, but will not comment.

It is currently unclear what effect the directive will have on private manufacturers such as BYD, Xpeng or Nio. BYD is not only planning to restart sales in Germany, but is also planning an electric car factory in Hungary. Xpeng has also been officially looking for a production site in Europe since the summer.

Meanwhile, according to the EU, there are still ‘significant gaps’ in the ongoing negotiations to avert EU tariffs. EU Trade Commissioner Valdis Dombrovskis and Chinese Trade Minister Wang Wentao held a video call on Friday to discuss the progress of the negotiations to date. Both agreed to continue the talks in the near future. Eight rounds of negotiations have already taken place.

Price commitments are apparently currently being discussed. The EU Commission justified the increased special tariffs with subsidies in China for car manufacturers, which is a competitive advantage over European manufacturers. China then brought price commitments into play in order to control the prices and quantities of exports and thus replace the anti-subsidy tariffs. However, there are apparently differing views on the design of such a complex mechanism.

In this context, China is also said to have warned car manufacturers that export to the EU against negotiating individual solutions and tariff rates with the EU. As part of the talks led by the Chinese Trade Association, the government is endeavouring to reach a framework agreement that covers all manufacturers.

bnnbloomberg.ca (China rumours), bnnbloomberg.ca, reuters.com (ongoing discussions)