Chinese electric vehicle (EV) manufacturers‘The ambition to invest globally stalled after Beijing urged them not to invest in countries like India and Turkey.
According to Bloomberg, the Commerce Department in July convened executives from more than a dozen electric car makers under so-called “window guidance” to discuss the risks of building factories overseas.
Two industry officials familiar with the situation confirmed the meeting had taken place, saying the ministry had ordered automakers to better protect their assets and technology as they ramp up their expansion abroad.
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In mainland China, authorities use window guidance to give verbal or written instructions to companies on government policies. Generally, companies that do not comply with policy guidelines given through window guidance are not punished in accordance with the country’s rules and laws.
At the meeting, electric vehicle manufacturers were encouraged to focus on disassembly lines, where key components are produced domestically before being shipped overseas where they are assembled closer to the consumer market, rather than setting up supply chains and large-scale facilities outside the mainland.
They were also told not to make investments in countries such as India and Turkey, the sources said.
The Commerce Department did not respond to questions from the Post on Thursday.
The sources said the guidelines came amid concerns from policymakers about Beijing’s growing tensions with certain countries, where Chinese companies and products could be boycotted by local authorities and consumers. In addition, government officials are concerned about the risk of Chinese technology being stolen by foreign counterparts.
“The instructions (from the ministry) are interpreted as a warning to companies as they are now actively looking to increase production capacity in markets such as Southeast Asia and some European countries,” said Chen Jinzhu, CEO of Shanghai Mingliang Auto Service, a consultancy. “It may cause some companies to slow down their overseas factory construction pace.”
According to David Xu Daquan, president of Bosch in China, the world’s largest automotive supplier, Chinese electric vehicle manufacturers and suppliers in the automotive supply chain are leading the world by making optimal use of core technologies for batteries, self-driving cars and in-car entertainment.
The mainland is also the world’s largest market for electric cars. According to the China Passenger Car Association, sales of pure electric and hybrid cars accounted for 65 percent of the global total in the first half of this year.
However, EV manufacturers of by D – the world’s largest maker of electric cars – to start-up Hozon New Energy Automobile are running into trade barriers erected by developed economies.
In May, the White House quadrupled tariffs on Chinese-made electric cars, now standing at 100 percent.
Last month the European Union said additional import duties from 9 to 36.3 percent would be applied to electric cars imported from China, 11 months after China launched an anti-subsidy investigation into battery-powered cars assembled on the mainland.
A number of companies from BYD to Great Wall Motorcycles are aggressively expanding their production abroad with plans to build electric cars in or near consumer markets to avoid high tariffs.
The ministry told automakers at the meeting that some countries inviting Chinese EV assemblers to build factories are not treating them fairly, as foreign governments are also erecting or considering erecting trade barriers against vehicles produced on the mainland.
Chinese electric vehicle manufacturers are also working on a brutal price war at home.
In April, Goldman Sachs estimated in a research report that the profitability of the entire Chinese EV industry could turn negative this year if BYD cuts another 7 percent, or 10,300 yuan (US$1,447), from the price of its cars.
This article originally appeared in the South China Morning Post (SCMP)the most authoritative voice covering China and Asia for over a century. For more SCMP stories, explore the SCMP app or visit the SCMP’s Facebook And Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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