European multinational automaker Stellantis N.V. is moving part of its production of Chinese brand electric vehicles to Europe. This is the latest sign of global automotive manufacturers changing their regional strategies following the announcement of additional tariffs on Chinese electric vehicles by the European Union this week.
Based in Amsterdam, Netherlands, Stellantis, the world’s fourth largest automotive manufacturer, announced in May that they would start selling electric vehicles produced by Chinese automaker Leapmotor at their European dealerships starting from September. However, Stellantis CEO Carlos Tavares confirmed on Thursday (June 13) that some of the vehicles will be assembled in European factories.
According to the Financial Times, Tavares stated at the annual Stellantis meeting in Detroit that “a certain number of Leapmotor products have to be assembled in Europe”. He added that the tariffs planned by Brussels are aimed at addressing the issue of European car manufacturers lacking competitiveness compared to Chinese counterparts.
Tavares mentioned that the tariff levels announced by the European Commission exceed the reasonable level for importing rather than locally producing by the company.
Chinese automakers are introducing various lower-cost electric vehicles to the European market, prompting European traditional car manufacturers to develop more affordable electric cars. Stellantis has chosen to invest and cooperate with domestic Chinese car manufacturers.
In October 2023, Stellantis announced an investment of approximately 1.5 billion euros to acquire around 20% of Leapmotor. Additionally, they established a joint venture company named “Leapmotor International”, with Stellantis holding 51% ownership and appointing the CEO of the company. This gives Stellantis exclusive rights to produce, export, and sell Leapmotor products outside of China.
Stellantis, along with Renault and other automakers, have long warned that a wave of low-cost Chinese car models could overwhelm European competitors. German automakers like Mercedes-Benz and BMW, fearing retaliation from China, have strongly lobbied against trade protectionism.
The differing stances on imposing tariffs also highlight divisions in the European automotive industry. German car manufacturers heavily rely on the Chinese market, while French and Italian automakers have not entered the Chinese market and rely more on the European market.
Executives from German automotive giants BMW and Volkswagen called on the EU in early May not to impose import tariffs on Chinese electric vehicles, as this may disrupt the EU’s green agreement plans.
China is the second largest market for BMW after Europe, with sales in China accounting for nearly 32% of first-quarter sales. Like their German competitors Volkswagen and Mercedes-Benz, BMW heavily depends on revenue from business in China. BMW exports Mini EV and iX3 produced in China to Europe, hence directly affected by the tariff increase, with an impact of up to 21%.
In contrast, France, with a lower dependence on the Chinese market, actively pushes for the EU to launch anti-dumping and anti-subsidy investigations against Chinese car manufacturers and hopes to increase tariffs on Chinese electric vehicles. France is concerned that the influx of low-cost Chinese electric cars into the European market will pressure French mid-to-low-priced car manufacturers.
Consulting firm Rhodium Group estimated in a research report that companies like BYD still have the ability to gain market share in the EU even with a 30% tax rate, and it would only be when tariffs reach 45% to 55% that Chinese car manufacturers lose commercial appeal in the European market.
Even before the EU announced a 38.1% tariff increase on Chinese electric vehicles, Chinese manufacturers have been seeking to establish assembly plants in Europe to avoid paying tariffs.
China’s largest electric vehicle manufacturer, BYD, plans to start producing cars at a new plant in Hungary next year and is selecting the site for its second European plant. Chery plans to increase the annual production capacity of its newly acquired Barcelona plant to 150,000 units by 2029.