In the eighties and nineties it was Europe that went to China. Now will China go to Europe? The pandemic, the instabilities on the energy markets and the trade war between Beijing and Washington are just some of the reasons that today underlie the phenomenon of reshoring of many strategic activities. Inspired by this phenomenon, Chinese companies are watching closely the Old Continent as an investment opportunity greenfield.
China’s commitment to electric mobility
This trend appears to be confirmed by the data. According to thelast report joint venture of the Mercator Institute for China Studies in Berlin (MERICS) and the Rhodium Group Chinese investment is generally shrinking (-22% compared to 2021), except in the battery sector. “Chinese companies are investing billions in the EV supply chain in Europe. They have become major players in Europe’s green transition,” said Agatha Kratz, who heads the research group dedicated to China-EU relations.
Own the electric mobility market is at the heart of the phenomenon of Chinese investment plans. In April, China’s SVOLT Energy Technology Co he announced that it has planned the allocation of at least five plants in Europe. The preferred destination remains Germany, where SVOLT will also build a dedicated automotive assembly plant in Brandenburg, the state that hosts Tesla’s gigafactory. The company aims for a production capacity of at least 50 gigawatt-hours by 2030, enough to produce about 100 million cells per year that will be capable of powering more than one million electric vehicles with 40-kilowatt-hour batteries.
Before SVOLT it was the battery giant CATL ad to announce the construction of a factory in Arnstadt, Thuringia. The six production lines planned in Germany are added to the first plant in Erfurt and the huge 100 gigawatt-hour plant in Hungary. CATLwhich is currently the largest battery manufacturer in the world, has been defined by many a real rising power in the electric car sector in Europe. As reported by the MERICS document, the foreign direct investments announced by China in the supply chain of electric cars are increased dramatically, going from 605 million dollars in 2016 to 24 billion in 2022. According to estimates, Asian companies they will have occupied 44% of the EU market by 2030.
Pros and cons of Chinese commitment to European reshoring
Facilitated by the Union market, Chinese companies in the sector will have a real commercial advantage as soon as the factories become fully operational. Added to this is the ban on the sale of diesel and petrol cars from 2035, a choice that will require a complete reconversion of the European automotive industry quickly with all that it entails in terms of human resources and technologies. A problem that is not new to the European leadership, which since 2019 has defined China as a “systemic rival” for the lack of transparency in matters of subsidies and concessions for its companies abroad.
However, the supply chain for the materials needed to produce electric cars is complex. The return of industrial activities to European soil requires a “regionalization” of the supply chain difficult to implementbut necessary for a new market logic that can no longer rely exclusively on the economic advantage of the activities offshore. No longer relying on a “just in time” material storage model (the storage of materials sufficient to cover an already validated order), but adopt a logic “just in case”. In other words, companies that are trying to bring plants closer to the target market are now starting to think in terms of ease of procurement of materials on the basis of a storage capable of making up for the unexpected.
Such an approach could also condition the work of Chinese companies in the Union even if the dynamics of the supply chains are often more complex and the information not very transparent. And how much he recounted in Bloomberg the president and managing director of Manuli Rubber Industries SpA Dardanio Manuli when he realized that returning from China and relying on EU suppliers had made his company dependent on a supply chain that – in reality – originated in Ukraine.
The semiconductor sector
In the framework of key technologies for the future zero-emission industry also falls the discourse on microchips. Thanks to the recent ones US maneuvers to contain Chinese expansion in this area, Europe has become a hotspot for companies like the Taiwanese giant TSMC, who have already announced the construction of new semiconductor plants for the European market. Added to this is a more careful scrutiny by European decision-makers, who have held back acquisitions deemed dangerous to national security. Among the most striking cases emerges that of Wafer Fab, the Newport-based microchip firm that had been acquired by China’s Nexperia. Now the British government he asked the Asian company to sell at least 86% of the shares to avoid the leakage of know-how towards the People’s Republic. The acquisition of Elmos Semiconductor of Dortmund, Germany, also ended in stalemate in the face of a direct intervention of the German government.
For now, Italy remains a distant port for Chinese companies, especially when it comes to investing in large-scale and potentially medium-long term projects. If we talk about initiatives related to the strategic components for the energy transition, in particular, the boot remains more of a market than an industrial node from which to pass the tech chain of tomorrow. The United Kingdom, France and Germany remain the favorite destinations for Chinese capitalsa horizon to which it has recently consolidated the role of Hungary. An example of this is the case of the group Stellarthat today stops a significant part of the Italian market both in the private sector and in the one dedicated to commercial vehicles. SVOLT has officially entered the list of lithium battery suppliers with an agreement on supplies starting in 2025, and other negotiations are underway with the different players involved in the production and assembly of vehicles. A reshoring with Chinese characteristics.
Cover photo EPA/ALEX PLAVEVSKI