BYD dodges EU tariffs with $1 billion factory deal in Turkey

Europe is trying to protect itself from the influx of Chinese products, which are much cheaper than European ones. This is because Beijing heavily subsidizes many industries, such as electric car manufacturers and fast-fashion giants like Shein.

To counteract what the European Commission sees as unfair competition supported by China, Brussels has imposed additional duties on numerous products, reducing the profitability of their purchase. This is the case, for example, with electric cars (more on this later).

The Chinese, targeted by these additional tariffs, bypassed the charges by producing cars locally. That’s why one electric car factory is being built in Hungary (with another one planned), and soon also in Turkey.

On Monday, July 9, the Turkish government announced that it signed an agreement with China's largest electric car manufacturer, BYD, to build a factory in Turkey. The deal is worth $1 billion.

The "Financial Times" reports that Turkey is part of the EU customs union, meaning vehicles can be exported to the community without additional duties. The newspaper adds that the factory will be able to produce 150,000 vehicles annually and is planned to start operations by the end of 2026. The plant will create about 5,000 jobs.

Besides the standard 10% tariffs, as of July 5, additional penalty charges have been levied on Chinese electric cars in the EU. "This is 17.4% for cars from Chinese company BYD, 20% for Geely cars, and 38.1% for SAIC cars (selling electric vehicles under the MG brand)," reports Wyborcza.biz.

The service adds that companies manufacturing electric cars in China (this also applies to European companies like BMW, which manufactures the iX3 model there) that cooperated with the EU authorities during the investigation were subjected to an average rate of 21%.

According to the "FT," Europe is finalizing higher tariffs on electric vehicles manufactured in China to protect local car producers. BYD will be subjected to a total tariff rate of 27.4% on electric vehicles, as the agency also notes.

The newspaper reminds that Turkey itself also imposes additional duties on vehicles imported from China, not just electric ones. Ankara's rate is 40%.

The "FT" writes that Turkey has a sizeable automotive industry, with foreign groups operating, including Hyundai, Toyota, Renault, and Ford, often in joint ventures. According to the Turkish Automotive Manufacturers Association, car manufacturers produced about 1.5 million vehicles in Turkey last year. The agency highlights that the country's primary export market is the EU.

UBS analysts state that Chinese cars produced in Eastern Europe will have a 25% cost advantage over European rivals.