China tells carmakers to pause investment in EU countries backing EV tariffs, sources say

Investment in EU: China has told its automakers to halt big investment in European countries that support extra tariffs on Chinese-built electric vehicles, two people briefed about matter said, a move likely to furr divide Europe.

new European Union tariffs of up to 45.3 per cent came into effect on Wednesday after a year-long investigation that divided bloc and prompted retaliation from Beijing.

Ten EU members including France, Poland, and Italy supported tariffs in a vote this month, in which five members including Germany opposed m and 12 abstained.

As Beijing continues negotiations over an alternative to tariffs, Chinese automakers including BYD, SAIC, and Geely were told at a meeting held by Ministry of Commerce on Oct. 10 that y should pause ir heavy asset investment plans such as factories in countries that backed proposal, said people.

y declined to be named, as meeting was t public.

Several foreign automakers also attended meeting, where participants were told to be prudent about ir investments in countries that abstained from voting and were "encourd" to invest in those that voted against tariffs, people said.

Geely declined to comment. SAIC, BYD and commerce ministry did t immediately reply to requests for comment.

Italy and France are among EU countries that have been courting Chinese automakers for investments, but y have also warned of risks that a flood of cheap Chinese EVs pose to European manufacturers.

State-owned SAIC, China's second-largest auto exporter, is choosing a site for an EV factory in Europe and has been separately planning to open its second European parts centre in France this year to meet growing demand for its MG-brand cars.

French government did t immediately reply to a request for comment.

Italian government is in talks with Chery, China's largest automaker by exports, and or Chinese automakers, including Dongfeng Motor 0489.HK, about potential investments.

Italy's industry ministry declined to comment. Dongfeng and Chery didn't immediately respond.

BYD is building a plant in Hungary, which voted against tariffs. Chinese EV giant has also been considering relocating its European headquarters from Nerlands to Hungary due to cost concerns, two separate people with kwledge of matter said.

Even before Beijing issued its guidance, Chinese companies were cautious about independently setting up production sites in Europe, as it requires large sums of investment and a deep understanding of local laws and culture.

automakers were also told at Oct. 10 meeting that y should avoid separate investment discussions with European governments and instead work toger to hold collective talks, people said.

directive follows a similar warning in July when commerce ministry advised China's automakers t to invest in countries such as India and Turkey, and to be cautious with investments in Europe.