One analyst on the Volkswagen Group's annual results call this week hopefully put it to CEO Oliver Blume that Volkswagen might want to partner with a Chinese firm to build the ID 1 small EV locally. Maybe MG parent SAIC, a long-time partner of Volkswagen in China, which is looking to build cars in Europe.
The answer came back: no. Volkswagen is building the ID 1 at its Portuguese plant on a Volkswagen EV platform, and while the car might use Chinese-supplied modules, this is a Volkswagen project and as such is so close to the edge in terms of profit margin that neither Skoda, Seat nor Cupra will get a version.
In theory, Chinese car makers are in an excellent place to help out European counterparts struggling with high costs and a surfeit of factories amid a falling market.
They are the current masters of low-cost automotive manufacturing, forged through a combination of white-heat competition and a leg-up from the Chinese state.
That cost advantage has been pretty much negated in Europe after the EU levelled the playing field with punitive import tariffs on Chinese EVs and range-extender EVs of up to 45%.
Building those cars in Europe would remove those tariffs in an instant – and give the Chinese firms the flexibility to better adapt to local market tastes as their sales increase.
And what better way to do that than to partner with existing manufacturers building cars in Europe, many of which already have strong ties with Chinese firms via joint ventures.
Factories are increasingly coming up for grabs as Ford, Volkswagen, Renault and Stellantis shrink their production networks. Or there’s the option of taking on a mothballed or sub-capacity line in a plant, for example at Nissan’s Sunderland’s facility. Problem solved.
Except that’s not really happening. Last year, Chinese premium EV brand Nio was reportedly interested in taking on Audi’s doomed EV plant in Brussels, Belgium, while BYD and Chery were both mentioned as possible buyers for Ford’s Saarlouis plant in Germany, which will cease manufacturing the Focus in November. In the end, neither plant will be sold to another automotive company, Chinese or otherwise.
Buying an existing plant in western Europe makes no sense for Chinese car makers, even if the price is low and further sweetened with subsidies. The bill for both wages and power will be too high, the plant will need extensive modernisation to efficiently build new EVs and the workforce is likely to be heavily unionised. Unions aren’t necessarily a problem, but the immediate clash of cultures with a Chinese management used to a more adaptable workforce is likely to cause issues.
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