BYD will invest $1 billion in Turkey to build a factory! Will Chinese car companies enter the European Union through Turkey?

The Anadolu Agency of Turkey reported live on the 8th the signing ceremony of Chinese car manufacturer BYD's investment in building a factory in Turkey. Under the witness of Turkish President Erdogan, BYD Chairman Wang Chuanfu and Turkish Minister of Industry and Technology Kasir completed the signing. It was reported that BYD will invest $1 billion in Turkey to build a factory with an annual production capacity of 150,000 vehicles, expected to start production in 2026.

On the 8th, BYD signed an investment agreement with the Turkish government. (IC photo)

The Turkish newspaper "Economic Report" reported on the 9th that the new factory will produce electric vehicles, hybrid vehicles, and include a research and development center, providing 5,000 job opportunities locally, effectively promoting the country's automotive industry. The Turkish newspaper "Daily Morning News" analyzed that according to the tariff alliance agreement between Turkey and the European Union, cars manufactured in Turkey enjoy preferential conditions for entering the EU market, and BYD's investment in the local market may also benefit from this policy. The UK's "Financial Times" stated that this investment indicates that Chinese car manufacturers are adjusting their strategies to avoid protectionist measures. At the time of this agreement, BYD is seeking to enter the vast EU market, while the EU has imposed tariffs on electric vehicles manufactured in China.

According to Reuters, Kasir stated on the 8th that the tariff alliance agreement between Turkey and the EU may help investors, including BYD, enter the European market. Kasir also revealed that Turkey is currently in "intensive negotiations" with other car manufacturers from Europe and Asia on investment issues, as Turkey is seeking to attract foreign investment to drive economic reform. In addition, Silakaya, Vice Chairman of the ruling Justice and Development Party in Turkey, revealed that GAC Group is in negotiations with Turkey's new energy car company TOGG on the possibility of establishing a joint venture.

"Nikkei Asia Review" stated that Turkey has been trying to protect its domestic car industry. In March 2023, Turkey imposed a 40% import tariff on electric vehicles manufactured in China on top of the 10% tariff. In June of this year, Turkey announced that this policy would expand from electric vehicles to all Chinese imported vehicles (including car parts). The Turkish Ministry of Trade stated that this move aims to encourage investment and production within Turkey. Sahin, General Manager of Turkey's EBS Automotive Consulting, stated that this government measure in Turkey has driven BYD's investment in the country. Other Chinese electric car brands such as Chery and Geely may also follow BYD in investing in Turkey.

Liu Zhongmin, a professor at the Middle East Research Institute of Shanghai International Studies University, told the "Global Times" on the 9th that Chinese car companies investing in and establishing factories in Turkey can to some extent improve the tariff issues faced when exporting to the EU. However, the key purpose of the EU imposing tariffs on Chinese electric vehicles is to protect the local automotive industry, and using Turkey as a bridge to solve the export issues to the EU poses uncertainties "Trade policies of various countries are constantly adjusted in response to changes in industrial competitive dynamics. In the future, if Chinese cars are exported to the EU through Turkey in large quantities, it is difficult to say whether the EU will introduce new restrictive measures," said Huang Minxing, a professor at the Middle East Research Institute of Northwest University, to Global Times reporters.

Zan Tao, Vice President of the Regional and Country Studies Institute of Peking University, also told Global Times reporters that competition among countries in the electric vehicle sector is becoming increasingly fierce. Every move made by Chinese companies in overseas markets is closely watched by Western countries. In the future, if the overseas expansion of the Chinese automotive industry affects the interests of Western countries, their industrial protection policies will also be correspondingly upgraded. In addition, Turkey's previous imposition of tariffs on Chinese passenger cars without consulting the public and in violation of WTO rules demonstrates the instability of its trade protectionist practices and policies. Therefore, the development of Chinese car companies in Turkey may be accompanied by a lot of uncertainties, which need to be taken seriously.

Liu Zhongmin told Global Times reporters that when Chinese companies invest in setting up factories in Turkey, the markets they radiate to include not only the EU but also the Middle East, the Caucasus region, and the Balkans. He believes that Turkey is a hub that can broadly radiate to surrounding markets. Therefore, the market for Chinese companies is not necessarily limited to the EU, which is also the strategic value of Chinese companies setting up factories in Turkey.

Authors: Zhang Hao, Ni Hao, Chen Xin; Source: Global Times; Original Title: "BYD to Invest $1 Billion in Turkey! Will Chinese Car Companies Enter the EU through Turkey?"