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China refocuses EV investment towards Europe

Regulation and political developments among factors leading to a change in strategy


Pete Carvill

Chinese investment in the production of electric vehicles (EVs) has shifted away from North America and towards Europe, the Middle East and Asia, according to Rhodium Group.

Research from the firm suggests outbound foreign direct investment to North America from China fell 10% in 2023 and European, Middle Eastern and Asian countries now account for some three-quarters of Chinese investment.

Rhodium also predicted this year would see investment shift from battery to the manufacture of EVs within Europe, Latin America and Asia. “Key drivers will include China’s slowing home market and host economies’ demands for higher value-added and job-creating investments in return for market access,” it said. “Investment in North America will remain volatile due to regulatory uncertainty, but Mexico could see an influx of Chinese projects.”

The firm added there are several “push” and “pull” factors around how the Chinese market is fuelling its overseas investment into electric vehicle production. Regulation was one issue, it said, along with political developments in the host countries.

“Carmakers in Europe and the US prefer that battery makers operate close to their plants to prevent supply chain disruptions and reduce transportation costs,” it explained. “Chinese battery manufacturers are among the few firms that have the technology and capital needed to fill that role.

“Meanwhile, China’s slowing and increasingly crowded domestic EV market serves as an additional draw to go overseas. Coupled with a steady uptick in global EV adoption, this incentivizes China’s leading EV companies—including raw material refiners, battery material producers, battery makers, and EV producers—to target overseas markets.”

Against the trend

This development appears something of a reversal of broader foreign direct investment (FDI) trends within the European market. The latest statistics from Statista, for example, indicate foreign investors withdrew more money from their European investments in the second quarter of 2023 than they invested into the continent in that period.

Olan McEvoy, research expert at Statista, wrote: “On the other hand, European investors sent $17.29bn [€15.87bn] into investments outside of Europe during this quarter. Both net inward and outward FDI in Europe declined sharply in the second quarter of 2023, as deteriorating economic conditions in Europe led to a slowdown of investment. Nevertheless, current trends mark a turnaround from quarter four of 2022, which saw sharply negative flows, both inward and outward.”