The EU’s threatened protective tariffs are making production in Spain attractive for Chinese car manufacturers. The president of the Spanish car manufacturers’ association has resigned in protest against government policy.
The Chinese car manufacturer Chery wants to start producing electric cars on Spanish soil before the end of the year. A new factory is not necessary to start production, as Chery can produce on the site of a Nissan factory in the industrial district of Barcelona that will be closed in 2021. Spanish Prime Minister Pedro Sánchez personally came to Barcelona from an EU summit in Brussels at the end of April to sign the contract with the manufacturer from the Chinese province of Anhui.
“Our government is now opening the door to Chinese car manufacturers,” commented the daily newspaper “La Voz de Galicia”. This could make Spain a gateway for Chinese electric models in Europe, because thanks to production in an EU country, manufacturers from China will now be able to circumvent European protective tariffs.
This may have been the main reason why the Chinese managers decided to locate in Spain. Last week, the EU Commission threatened to increase import duties on Chinese electric vehicles from 10 percent to up to 38 percent from July 4 because China is supporting its car manufacturers with high subsidies. The EU is thus following a similar decision made by the US government in May.
Protests against preferential treatment of the Chinese
The investment for Chery’s establishment in Catalonia is expected to amount to around 400 million euros. State and regional funding programs from Spain will cover the majority of the costs. This sounds absurd in light of the new EU import tariffs. However, the Spanish government wants to keep the money flowing because it expects 1,250 new jobs to be created. Most of these will be filled by the employees who were laid off from Nissan three years ago. “The deal with Chery is symbolic of the reindustrialization of Catalonia and all of Spain,” said Spain’s head of government.
However, the generous granting of subsidies to a new competitor from Asia has brought the Spanish automobile industry (Anfac) into action. Wayne Griffiths, President of Anfac, the umbrella organization of Spanish automobile manufacturers, resigned from his post in protest last week. The Spanish government has stopped supporting the domestic automobile industry in its switch to electric cars, he said in his letter of resignation. In February, the government promised that there would soon be a new environmental bonus for the purchase of an electric vehicle. This has not yet happened. In addition, the network of publicly accessible charging stations was to be further expanded, but nothing has happened here either, said the Anfac President.
Spain is the second largest car manufacturer in Europe after Germany. The first foreign manufacturer was Ford, which set up its own factory in the port city of Cadiz in 1920. Companies such as Chrysler, Fiat, Citroën and Renault followed in the 1950s. Almost all major car brands are now represented in this country. Last year, 2.45 million vehicles were produced in the 17 car factories in Spain. Around 84 percent were exported. The automotive industry accounts for 10 percent of Spain’s gross domestic product (GDP) and is the country’s second most important exporter after agricultural production.
It is becoming increasingly clear that the costly transition to electromobility is posing major challenges for the industry. For example, the American car manufacturer Ford wants to cut a third of its 4,700 jobs at its plant near Valencia due to the switch to electric vehicles. Production of four models has been discontinued there in recent years. This year, only the small car Kuga will roll off the production line, and annual production will be around 135,000 vehicles; five years ago, with Mondeo, S-Max, Transit and Galaxy, it was 367,000 cars.
Chery will not remain an isolated case
Chery’s plans for Spain, however, look quite different. In cooperation with its Spanish junior partner Ebro, which previously produced commercial vehicles and off-road vehicles, Chery plans to build the electric version of its SUV model Omoda 5 after the summer. By 2027, 50,000 vehicles are to be produced annually, including an off-road model from Chery and an electric pick-up from its Spanish partner Ebro.
The establishment of Chery, China’s largest car exporter, will not be an isolated case in Europe. The Chinese electric car group BYD is already building its own factory in Hungary, which is scheduled to be completed in 2027. And the Stellantis Group, which has had a stake in the Chinese electric car manufacturer Leapmotor since last autumn, is also examining the production of vehicles from its Chinese partner in Europe. Stellantis CEO Carlos Tavares said this at a meeting last week with analysts and investors in the Galician port city of Vigo.
The group, which emerged from the merger of Fiat Chrysler and PSA, has been put on the defensive by the planned increase in European protective tariffs. After the Brussels plans were announced, the company’s shares lost more than 4 percent of their value last Friday.