New Energy Vehicles (NEVs) in China

I have reservations about investing in Western countries, but I agree with @tphuang that Chinese EV makers need to invest in manufacturing facilities in Europe in order to sell there, just like Japanese and Korean automakers in the US

If the Chinese EV makers are smart, they should keep manufacturing of key pieces of tech like certain components in batteries and/or control systems in China so the factories are useless without them.

If BYD and CATL can finance their plants with loans from the EU or Western banks, then the risk is manageable. Setting up a local subsidiary is the only viable way to enter the EU in the long term for any automobile companies that want to gain significant market share.

To minimize the risk, BYD and CATL should expose loans or other financial arrangement locally. Making EU banks and companies to have a major stake in the investment. Even if the EU decided to confiscate the properties of Chinese companies, the losses would be minimized. Beside, EU has much more assets in China than the other way around so China can retaliate and hurt EU more than EU can ever hurt China.

Although, I don't support entering the US market. If Chinese automobile companies did really well in the US, then the Congress would immediately impose a worldwide ban on the Chinese companies. Avoiding the US market might actually buy Chinese automobile companies more time to develop, advance and be more competitive.

tphuang said:

Not really. People are too crazy about this worries of confiscation. Hungary has no pull in EU. If you think Chinese automakers can build all their factories in Hungary and be good to go, you are sorely mistaken.

Aside from the fact that Hungary is too small in terms of population size to support this, the blowback from France, Germany & Italy will be huge.

The end goal of BYD with any plant is to sell in Europe. There is enormous pressure from European automakers to stop BYD from gaining market share in Europe. The only realistic way to combat that is to build factories in countries that have large automakers. So France, Germany & Italy. As such, BYD will build a plant in one of these countries.

I said a while back that BYD would build plants in Vietnam and Indonesia and that has turned out to be true. These things are not rocket science to figure out.

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Okay, buy why Western Europe? Why not focus specifically on the fringe of the EU? Certainly I can see Italy and maybe France (the only people who show a semblance of independence) potentially being a good spot, but what about Greece, Turkey, Poland or the Baltics? Yeah those people don't have any pool, and you're working with a smaller labor pool, but how many factories do you need?

Or better, yet, why even bother with building in Western Europe at all? You can build a campus near German universities, but the EU has free travel. Why plant seeds into Germany or France or UK, when you can probably get a much better deal in Eastern/Southern Europe, hire the engineers from Germany, hire marketing from France, and you can hire the laborers from much cheaper Eastern European labor pool. Not to mention that these any Eastern European country will be much more reluctant to follow any U.S. orders that would get in the way of BYD doing business in Europe.

I just don't see any advantage to building a factory specifically in Germany to sell to Germans. Plenty of German vehicles anyway... and plenty of Germans still buy them. So why take more risk?

KYli said:

If BYD and CATL can finance their plants with loans from the EU or Western banks, then the risk is manageable. Setting up a local subsidiary is the only viable way to enter the EU in the long term for any automobile companies that want to gain significant market share.

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This is the only way that makes sense to me, except you can get financing from an EU Bank and build in a country that's more geopolitically neutral. Like Romania, or Bulgaria, or maybe even Italy.

All four BYD locations in Hong Kong attacked by red paint and some damage to the doors

HighGround said:

Okay, buy why Western Europe? Why not focus specifically on the fringe of the EU? Certainly I can see Italy and maybe France (the only people who show a semblance of independence) potentially being a good spot, but what about Greece, Turkey, Poland or the Baltics? Yeah those people don't have any pool, and you're working with a smaller labor pool, but how many factories do you need?

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BYD is looking to build a 800k PV factory. You need to think big. China will have multiple battery and car factories in Europe. BYD will have multiple factories in Europe. For example, it has bus factory in Spain and Hungary

HighGround said:

Or better, yet, why even bother with building in Western Europe at all? You can build a campus near German universities, but the EU has free travel. Why plant seeds into Germany or France or UK, when you can probably get a much better deal in Eastern/Southern Europe, hire the engineers from Germany, hire marketing from France, and you can hire the laborers from much cheaper Eastern European labor pool. Not to mention that these any Eastern European country will be much more reluctant to follow any U.S. orders that would get in the way of BYD doing business in Europe

I just don't see any advantage to building a factory specifically in Germany to sell to Germans. Plenty of German vehicles

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anyway... and plenty of Germans still buy them. So why take more risk?

This is the only way that makes sense to me, except you can get financing from an EU Bank and build in a country that's more geopolitically neutral. Like Romania, or Bulgaria, or maybe even Italy.

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because you are not like everyone else. You are from China. You are not going to be treated fairly. You are going to be seen as coming to Europe to kill their livelihood (which is their auto industry).

Right now, East and central Europe are more hostile to China (outside of Hungary) than Western Europe, because they depend on America for security guarantee. If you are concerned about the invisible hand, then investing in countries that are worried about Russian invasion might be the last thing you want to do.

When it comes to where to build factory, You have to build something in France or Germany due to their power in EU and the auto industry they would want to protect. Beyond that, you probably also need to build in Spain or Italy.

For BYD, it is where can I build a factory so that I will get open access to Europe without tariffs? What do I need to do so that I can sell battery, solar panels & ESS in Europe without facing tariffs?

check this. I mean BYD thinks the same way I do on this matter.

BYD will be very important diplomatically for China. You have to think about things that way.

That's why I also said twitter that Malaysia will get something more than it has already gotten. Having pro-China policy matters here

tphuang said:

BYD is looking to build a 800k PV factory. You need to think big. China will have multiple battery and car factories in Europe. BYD will have multiple factories in Europe. For example, it has bus factory in Spain and Hungary

because you are not like everyone else. You are from China. You are not going to be treated fairly. You are going to be seen as coming to Europe to kill their livelihood (which is their auto industry).

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tphuang said:

Right now, East and central Europe are more hostile to China (outside of Hungary) than Western Europe, because they depend on America for security guarantee. If you are concerned about the invisible hand, then investing in countries that are worried about Russian invasion might be the last thing you want to do.

When it comes to where to build factory, You have to build something in France or Germany due to their power in EU and the auto industry they would want to protect. Beyond that, you probably also need to build in Spain or Italy.

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check this. I mean BYD thinks the same way I do on this matter.

BYD will be very important diplomatically for China. You have to think about things that way.

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I guess we'll just agree to disagree. The difference between China and Russia is that China isn't on any of these countries' borders. They are genuinely afraid of Russia. Meanwhile, Germany, who shouldn't be afraid of Russia, shrugged off someone blowing up their pipeline and tolerated sky high energy prices just because United States said so.

Well, I'll respect that you have your opinion and that it follows a logic, and that's it well informed. Good luck to BYD, I'm sure they'll sell lots of cars. I hope that things don't turn out for the worst, and we'll see what they ultimately decide to do. There are lots of growing markets that aren't Europe as well after all.

HighGround said:

I guess we'll just agree to disagree. The difference between China and Russia is that China isn't on any of these countries' borders. They are genuinely afraid of Russia. Meanwhile, Germany, who shouldn't be afraid of Russia, shrugged off someone blowing up their pipeline and tolerated sky high energy prices just because United States said so.

Well, I'll respect that you have your opinion and that it follows a logic, and that's it well informed. Good luck to BYD, I'm sure they'll sell lots of cars. I hope that things don't turn out for the worst, and we'll see what they ultimately decide to do. There are lots of growing markets that aren't Europe as well after all.

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don't think of BYD as just an auto company. They are also a political tool for China right now to improve relationship with rest of the world. See the kind of role that TSMC has to play for Taiwan

HighGround said:

I guess we'll just agree to disagree. The difference between China and Russia is that China isn't on any of these countries' borders. They are genuinely afraid of Russia. Meanwhile, Germany, who shouldn't be afraid of Russia, shrugged off someone blowing up their pipeline and tolerated sky high energy prices just because United States said so.

Well, I'll respect that you have your opinion and that it follows a logic, and that's it well informed. Good luck to BYD, I'm sure they'll sell lots of cars. I hope that things don't turn out for the worst, and we'll see what they ultimately decide to do. There are lots of growing markets that aren't Europe as well after all.

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@tphuang is correct in the analysis.

You underestimate how much sentiment has turned in Central and Eastern Europe against China with the Ukraine War.
Remember China is still a communist country and they hate communism.
Plus Russia is now a defacto junior partner of China.

I'm glad that NIO is swallowing their pride and cutting prices to be more competitive. They have little choice but to expand their customer base to ensure their NIO houses and swap stations, which they spent a lot of money building and maintaining, won't sit empty because there's only a handful of elite NIO car owners in the world.

Mcsweeney said:

I'm glad that NIO is swallowing their pride and cutting prices to be more competitive. They have little choice but to expand their customer base to ensure their NIO houses and swap stations, which they spent a lot of money building and maintaining, won't sit empty because there's only a handful of elite NIO car owners in the world.

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I wouldn't keep my hopes up. I still think they're completely screwed and will die a painful slow death