China asks its carmakers to keep key EV technology at home

HONG KONG – China has strongly advised its carmakers to make sure advanced electric vehicle (EV) technology stays in the country, people familiar with the matter said, even as they build factories around the world to escape punitive tariffs on Chinese exports.

Beijing is encouraging Chinese automakers to export so-called knock-down kits to their foreign plants, the people said, meaning key parts of a vehicle would be produced domestically and then sent for final assembly in their destination market. 

The instructions come as companies from BYD to Chery Automobile firm up plans to build factories in Spain, Thailand and Hungary as their innovative and affordable EVs make inroads in foreign markets.

China’s Ministry of Commerce held a meeting in July with more than a dozen automakers, who were also told they should not make any auto-related investments in India, the people said, asking not to be identified discussing private matters, in another bid to safeguard the know-how of China’s EV industry and mitigate regulatory risks.

In addition, carmakers wanting to invest in Turkey were told that they should first notify the Ministry of Industry and Information Technology, which oversees China’s EV industry, and the local Chinese embassy in Turkey.

Ministry of Commerce representatives did not respond to a request for comment.

China’s directive comes at a time when most major Chinese carmakers are looking to localise manufacturing to avoid tariffs on Chinese-made EVs.

The Commerce Ministry guidelines that demand key production should remain within China could hurt automakers’ efforts to globalise as they search for new customers to offset fierce competition and sluggish sales at home that are cutting into their bottom lines.

It could also come as a blow to those European nations wooing Chinese carmakers in the hopes their presence will bring jobs and a local economic boost.

BYD is planning on building a factory in Turkey, for example, that is expected to have an annual capacity of 150,000 cars and employ up to 5,000 people.

During the meeting, the Commerce Ministry noted that the countries inviting Chinese automakers to build factories are usually those enacting or considering trade barriers against Chinese vehicles.

Officials told attendees that manufacturers should not blindly follow trends or believe such calls for investment from foreign governments, according to the people.

Turkish politicians said in July that BYD has agreed to construct a US$1 billion (S$1.3 billion) plant in the west of the country.

Any new factory is expected to improve BYD’s access to the European Union, as Turkey has a customs-union agreement with the bloc.

Turkey introduced a 40 per cent tariff on vehicle imports from China in June. BYD declined to comment. BLOOMBERG