European Carmakers Abandon China for India and Indonesia Due to Electric Vehicle Tariffs

Major European automakers are considering shifting their electric vehicles (EVs) production facilities away from China, into neighbouring countries like Indonesia, India, and perhaps even back to Europe.

Volvo, for example, is relocating the production of its Chinese-made EVs to Belgium in response to anticipated European Union tariffs on vehicles imported from China, as reported by The Times.

A strategic shift
This strategic move involves the transfer of manufacturing for Volvo’s EX30 and EX90 models to Belgium, and possibly the assembly of certain Volvo models destined for the UK, according to unnamed sources cited by the report.

Owned by Zhejiang Geely Holding Group Co., Volvo is seen as the Western automaker most vulnerable to the impending tariffs, which are a result of escalating trade tensions between the EU and China. These tensions have sparked a series of anti-dumping investigations against China, with the EU alleging that Chinese EV makers benefit from unfair subsidies. The EU is expected to announce this week whether it will impose provisional tariffs starting July 4, potentially raising import duties above the current 10 per cent rate.

Volvo however has refuted The Times’ report in an official statement, describing it as speculative. A spokesperson for Volvo stated, “The decision to also build the EX30 in Ghent reflects our ambition to build our cars where we sell them as much as possible,” emphasising that the additional production capacity in Belgium had already been disclosed.

Reports have also surfaced about other auto manufacturers making EVs in China, like BMW, Volkswagen, Mercedes etc, who are looking to expand their operations beyond China in order to protect themselves.

China’s furious reaction
China has reacted strongly to the EU’s actions. Last week, Beijing accused the EU of attempting to “suppress” Chinese companies and promised to take measures to protect its interests. The Chinese government dismissed the allegations of unfair competition as baseless, with Commerce Minister Wang Wentao urging the EU to abandon trade protectionism in favor of dialogue and cooperation.

In a related trade dispute, Chinese dairy companies are reportedly preparing to request an anti-dumping investigation into EU dairy imports, according to the Global Times. This move indicates a broader strategy by China to counteract what it views as protectionist measures by the EU.

Volvo’s decision to shift EV production to Belgium aligns with its long-term strategy to manufacture cars close to their primary markets. This approach not only mitigates the potential impact of EU tariffs but also enhances supply chain efficiency and reduces logistical costs.

The EX30 and EX90 models are part of Volvo’s expanding electric vehicle lineup, reflecting the company’s commitment to sustainable mobility. By moving production to its Ghent plant, Volvo aims to ensure continued market access for these models in Europe, even if new tariffs are imposed.

What does it mean for China’s auto industry?
The potential tariffs and Volvo’s manufacturing shift highlight the broader challenges facing the global automotive industry amid rising trade tensions. Automakers with significant production in China may need to reconsider their supply chains and production strategies to navigate the evolving trade landscape.

For the EU, imposing tariffs on Chinese-made EVs is part of a broader effort to protect its automotive industry and address concerns over unfair competition. However, such measures could also provoke retaliatory actions from China, potentially escalating the trade conflict and impacting various sectors beyond the automotive industry.

As the situation unfolds, the decisions made by both the EU and China will likely have significant implications for international trade and the global economy. Companies like Volvo will continue to adapt their strategies to manage these uncertainties and maintain their competitive edge in key markets.