Chinese carmakers zoom ahead abroad

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By LIU YUKUN (China Daily) 13:54, June 17, 2024

Employees work at a factory of Chinese new energy vehicle manufacturer Nio in Hungary. ZHANG FAN/XINHUA

Chinese carmakers and auto parts manufacturers are increasingly diversifying their overseas production bases to meet growing global demand and address heightened supply chain security concerns, with Central European countries and Mexico becoming hot spots, experts and business executives said.

Their growing international presence shows they are keen to meet the rising demand from foreign clients who need quick responses and deliveries on time from parts suppliers, amid deglobalization and geopolitical tensions, the experts said.

Their remarks came after trade frictions intensified recently, including increased US tariffs on imports of Chinese products like electric vehicles, and the European Commission's decision on June 12 to impose extra duties of up to 38.1 percent on imported Chinese electric cars from July.

"Against the backdrop of deglobalization, foreign clients are shifting their focus from minimizing costs to supply chain security, thus favoring suppliers capable of producing parts near their sites. Central European countries and Mexico are popular destinations for investment due to their strategic location, favorable policies and proactive efforts to attract Chinese manufacturers," said Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers.

"The two regions also boast good industrial bases with established names that have already set up operations and need good-quality auto parts and systems, attracting Chinese automotive industry players and niche companies," Chen said.

From July, Serbia will implement a free trade agreement with China that will result in over 90 percent of trade between the two countries being tariff-free. Sectors such as automotive, lithium-ion batteries and photovoltaics will benefit first.

In Hungary, low corporate tax rate, the establishment of German vehicle production bases, as well as stable and favorable policies to welcome foreign investment also make it a hot spot for Chinese automotive and parts manufacturers.

"Several Central European countries, including Poland, Slovakia and Hungary, have been the main destinations for Chinese companies seeking to set up sites overseas," said Wang Binlian, director of overseas projects at Zhejiang Shuanghuan Driveline Co Ltd.

The Shenzhen-listed auto transmission producer invested 122 million euros for the first phase of a project in Hungary. It is also expected to sign a long-term investment cooperation agreement with the local government in the coming months.

Wang said: "For us, Poland has an advantage in logistics over Hungary because our clients (automakers) are mainly located in Germany, Sweden and Belgium. This makes it convenient for us to transport our products via land from Poland.

"However, we chose Hungary because of its friendliness toward Chinese companies. Our foremost priority is a stable investment environment, even if it results in marginally higher logistics costs. In addition, Hungary's cultural similarities to China enable us to adopt Chinese management systems effectively.

"Moreover, Hungary serves as a central hub for the eastward relocation of European manufacturing, with major firms like Audi and BMW setting up factories. The Hungarian government is also actively encouraging the development of its automotive manufacturing sector."

Zhang Taixin, director of Halms Hungary KFT, Zhejiang Huashuo Technology Co Ltd's overseas branch, agreed. Huashuo produces various forms of auto parts. Its Hungary site began construction in April 2022 and commenced production in March 2023.

Zhang highlighted the recent energy upgrade in Debrecen, Hungary, where Halms is based. The move was reportedly aimed at supporting auto and auto parts manufacturers and securing reliable energy supplies for them, alongside the local government incentives and subsidies to attract foreign investment.

"We envision a strong R&D center at the headquarters, complemented by powerful global production and manufacturing facilities. We leverage our global production capacity to address regional market imbalances, thus avoiding market fragmentation that does not serve manufacturers or consumers," Zhang said.

A BYD new energy vehicle on display at a showroom in Budapest, Hungary. XINHUA

Beyond Central Europe, Mexico has become a prime destination for Chinese automakers and parts suppliers. Local media outlets have reported that China's BYD, also the world's largest new energy vehicle manufacturer, is scouting locations in Mexico for a new factory.

Listed companies in the "Tesla supply chain", including auto parts makers Ningbo Huaxiang Group, Ningbo Tuopu Group and Xusheng Group, have already begun or accelerated plans to establish factories in Mexico, following Tesla's plan to set up a manufacturing plant of its own in Mexico.

Xusheng Group said the purpose is to quickly respond to technical and after-sales service needs of local customers, and achieve rapid product delivery.