The Ministry of Commerce convened executives from more than a dozen electric car makers in July, under so-called “window guidance”, to discuss the risks of building plants abroad, according to Bloomberg.
Two industry officials with knowledge of the situation confirmed the meeting took place and said the ministry told carmakers to better protect their assets and technology as they ramp up their expansion overseas.
In mainland China, authorities use window guidance to give verbal or written instructions to companies on government policy. Generally, companies that fail to comply with policy directions delivered via window guidance will not be punished in accordance with the country’s rules and laws.
During the meeting, the EV makers were encouraged to focus on knock-down assembly lines – where key components are produced at home before being shipped overseas where they are assembled closer to the consumption markets – rather than setting up supply chains and large-scale facilities outside the mainland.
They were also told not to make any investments in countries like India and Turkey, the sources said.
The commerce ministry did not respond to queries by the Post on Thursday.
The sources said the guidance arose from policymakers’ concerns about Beijing’s rising tensions with certain countries where Chinese businesses and products could be boycotted by local authorities and consumers. In addition, government officials are worried about the risk of Chinese technology being stolen by foreign counterparts.
“The instructions [by the ministry] are interpreted as a warning to the companies since they are now actively looking to raise manufacturing capacity in markets such as Southeast Asia and some European countries,” said Chen Jinzhu, the chief executive of Shanghai Mingliang Auto Service, a consultancy. “It may cause some of the companies to slow down their overseas plant building pace.”
Chinese EV makers and vendors in the automotive supply chain are at the global vanguard because they have capitalised on core technologies for batteries, self-driving and in-car entertainment, according to David Xu Daquan, the China president of Bosch, the world’s largest automotive supplier.
The mainland is also the world’s largest EV market, where sales of pure electric and hybrid cars represented 65 per cent of the global total in the first half of this year, according to the China Passenger Car Association.
However, EV makers from
BYD – the world’s largest electric car maker – to start-up Hozon New Energy Automobile are running into trade barriers set up by developed economies.
In May, the White House quadrupled tariffs on Chinese-made EVs, which now stand at 100 per cent.
Last month, the European Union said
additional duties of 9 to 36.3 per cent would be applied to EVs imported from China, 11 months after it launched an anti-subsidy investigation into battery-powered cars assembled on the mainland.
A number of companies from BYD to
Great Wall Motors are aggressively expanding production abroad with plans to build electric cars in or close to consumption markets as a way of avoiding high tariffs.
The ministry told the carmakers at the meeting that some countries who are inviting Chinese EV assemblers to build factories are not treating them fairly because the overseas governments are also erecting or considering trade barriers against vehicles made on the mainland.
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 were to slice another 7 per cent, or 10,300 yuan (US$1,447), off the price of its cars.
