Stellantis to shift some Chinese EV production to Europe

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Stellantis will shift output of some Chinese-brand electric vehicles into Europe, in the latest sign of how global carmakers will change their regional strategy following this week’s announcement by Brussels of planned additional tariffs on EVs made in China.

The owner of the Citroën and Fiat brands announced in May that it would sell electric vehicles from Chinese carmaker Leapmotor in its European dealerships from September. However chief executive Carlos Tavares confirmed on Thursday that some cars would be produced in Stellantis plants in Europe.

“A certain number of [Leapmotor] products will have to be assembled in Europe”, said Tavares, speaking at Stellantis’ annual meeting in Detroit. He added that the planned tariffs from Brussels were “correcting a lack of competitiveness” among European carmakers, compared with Chinese rivals.

Tavares said that the tariffs announced by the European Commission were at levels above which the company had previously agreed it would make sense to import rather than to produce locally.

Even before Brussels’ announcement to apply additional tariffs on Chinese-made EVs by up to 38 per cent, some Chinese car groups had been planning a shift to Europe.

The largest Chinese EV maker, BYD, which received a lower tariff increase of 17.4 per cent, plans to start producing cars at a new site in Hungary next year, and has been studying sites for a second plant in Europe. Another Chinese EV maker, Chery, is aiming to produce 150,000 cars per year from 2029 onwards from a plant in Barcelona.

Daniel Schwarz, an autos analyst at Stifel, predicted that Chinese OEMs would accelerate their construction of production capacity in the next three years in Europe.

“In [the] short term [tariffs are] a positive for European carmakers, but long-term it’s a negative as they will lead to long-term more investments in Europe by Chinese companies, more capacity and the price pressures will be similar to what we see in China right now,” he said.

The tariff proposals have also underlined the split in the European automotive industry between the German carmakers, which rely on the Chinese market, and the French and Italian groups that have not made inroads into China and rely more on the European market.

Carmakers such as Stellantis and Renault had long warned that a wave of cheaper Chinese models would outprice European rivals, while Germany’s Mercedes and BMW loudly lobbied against increased protectionism, fearing retaliation from China.

“German industry is very much exposed to Chinese business. And you know perfectly well this is why Germany is opposing these tariffs,” said Tavares.

The German carmakers universally reacted negatively to the tariffs, offering their support for “free trade” and warning of retaliation in China — their most important market. 

“Fair and, above all, free global trade is very important, drives innovation and growth,” said Mercedes chief executive Ola Källenius, which counts China as its single largest market with some 36 per cent of global sales.

“The EU Commission is thus harming European companies and European interests,” said BMW’s chief executive Oliver Zipse. “Protectionism risks starting a spiral: Tariffs lead to new tariffs, to isolation rather than co-operation.”

The Bavarian carmaker counts China as its single largest market, with 32 per cent of total sales — and it is also directly affected by the increase in tariffs — to the tune of 21 per cent — as it produces its electric iX3 vehicle in Shenyang and exports it to Europe.

“The tariffs are going to buy time but will not solve the problem,” said another European car executive. “European carmakers need time to come up with low cost alternatives,” they added — drawing a comparison with the European airline industry’s disruption by low-cost carriers such as Ryanair.