China’s government wants critical know-how to remain in the country. Pictured is a BYD production facility in Huai ‘an. picture alliance / CFOTO | CFOTO
The Chinese government is appealing to electric car manufacturers to produce important technology components only in China if possible.
This is intended to prevent technical know-how from flowing out of the country.
Many manufacturers have invested in production facilities abroad in response to the high punitive tariffs.
Chinese manufacturers of electric cars produce more cheaply than traditional car manufacturers. Many Western countries have therefore imposed punitive tariffs on Chinese imports. In response, Chinese manufacturers are now relocating production facilities abroad.
However, the government in Beijing is urging manufacturers to be cautious.
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Important know-how should remain in China
How “Bloomberg” reports that the Chinese Ministry of Commerce held a meeting with more than twelve automakers in July. The manufacturers were asked to produce important technological components only domestically, people familiar with the matter told Bloomberg.
Manufacturers should export so-called “knock-down kits” to their production facilities abroad. This means that key components are manufactured in China and then simply assembled in the target market.
This is an attempt to keep technological know-how in China and avoid regulatory risks.
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E-car manufacturers in difficult situation
The decision puts Chinese electric car manufacturers in a difficult position. Since they produce much more cheaply than their competitors, many countries have imposed high punitive tariffs on Chinese imports. To avoid these punitive tariffs, some Chinese manufacturers have invested in foreign production facilities – and this is precisely where the crux of the matter lies.
In order to avoid tariffs, a significant proportion of the value added must take place in the target market. Valdis Dombrovskis, Vice President of the European Commission, stressed in the Financial Times last month that it makes a crucial difference whether a factory only assembles components or actually manufactures vehicles. A certain proportion of the value added must take place in the EU, including the know-how.
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