TMTPost -- Dongfeng Motor Corporation Ltd., one of of the "Big Four" state-owned car manufacturers in China, is in pole position to build an auto plant in Italy, the latest sign that Chinese automakers are seeking ways to avoid possible additional tariffs in the Europe.

Credit：Dongfeng

Talks between Dongfeng and the Italian government about establishment of an auto facility are at an advanced stage, Reuters cited Italian sources close to the matter. The Rome government could join Dongfeng with a minority stake in the investment of the new plant, with aims to set up a hub for the whole of Europe, the sources said. The potential deal could also involve other key investors, including Italian companies from the components sector, they added.

Dongfeng was weighing building a facility with annual capacity of more than 100,000 units in Italy, said Qian Xie, head of its operations in Europe, in an interview in April. The new plant could be a win-win for Dongfeng and Rome as the auto company is under pressure at home where demand for fossil fuel vehicles has been falling and Italy, home for Stellantis’ key brand Fiat, is lagging behind European peers in electric vehicle (EV) adoption. Xie suggested a plant located in Italy enables Dongfeng to take advantage of "all the strong legacy that the country has in the automotive industry." "Italy is one of Europe's largest automotive markets and for a Chinese carmaker having local production means that you can supply all other countries in the area," Xie said. He said while Dongfeng has a strong belief of an electric future, the company would need to focus on hybrid cars as of now for Italy.

The plan to produce vehicles in Italy, if it came true, would be Dongfeng’s next major effort to expand in Europe. In the beinning of this year, Dongfeng signed a coopeartion agreement with Spanish Salvador Caetano Group,the largest automotive group in the Iberian Peninsula.

Dongfeng’s  consideration of new plant in Italy came as the European Union levied additional tariffs on EV imports from China.   The European Commission announced on July 4 it imposed provisional countervailing duties of up to 37.6%, on top of the ordinary BEV import duty of 10%, on imports of battery electric vehicles (BEVs) from China. The commission concluded through an anti-subsidy investigation that the BEV value chain in China benefits from unfair subsidization, which is causing a threat of economic injury to EU BEV producers.

Specifically, the additional individual duties on three sampled Chinese EV makers, would be 17.4% for BYD, 19.9% for Geely and 37.6% for SAIC. That means the EU decided to levy a little bit less duties on Geely and SAIC-made EVs since its proposed rates pre-disclosed on June 12 are 20% and 38.1%, respectively, while BYD, China’s largest EV manufacturer, faces the same tariff rate as EU’s original proposal disclosed more than a month ago.

According to a statement of the European Commission, other BEV producers in China, which cooperated in the investigation but have not been sampled, are subject to the 20.8% weighted average duty, marginally downgraded from the commission’s original proposed 21%, while all other BEV producers in China that did not cooperate in the investigation face an extra duty of 37.6%, compared with the originally proposed 38.1%.  

As the EU is hiking duties on Chinese EVs to as much as 48%, China's new generation of EV manufacturers is teaming up with local industry so as to make their cars are considered homegrown. Barcelona will  play host to the Omoda E5, made by China's Chery Automobile, which has partnered with Spain's Ebro-EV Motors. Chinese maker Leapmotor's T03 city cars are rolling off an assembly line a Stellantis plant in Tychy, Poland. China's No. 1 EV maker BYD has announced plans for its own factory in Hungary, with another on the horizon in Turkey. Zeekr plans to use existing production facilities in Europe owned by its parent Geely and is considering building its vehicles in Europe to avoid EU duties.