Exclusive: Spain the frontrunner for Chinese carmaker BYD's third European plant, sources say
![Item 1 of 2 Customers speak with a salesman at a BYD dealership in Sant Cugat del Valles, near Barcelona, Spain, September 12, 2025. REUTERS/ Albert Gea [1/2]Customers speak with a salesman at a BYD dealership in Sant Cugat del Valles, near Barcelona, Spain, September 12, 2025. REUTERS/ Albert Gea Purchase Licensing Rights, opens new tab](/_next/image?url=https%3A%2F%2Fwww.reuters.com%2Fresizer%2Fv2%2FCQCJ3NPTNRKT7N5JD67RXWE3UU.jpg%3Fauth%3Dad539225b1745cb5b09525261f21b7af2167d538005cea373f0acc675084bdfc%26width%3D1200%26quality%3D80&w=1920&q=75)
News Summary
Chinese leading automaker BYD is reportedly considering Spain as the top candidate for its third European car manufacturing plant, aiming to expand its sales on the continent. This plant, joining two others planned for Hungary and Turkey, would significantly boost BYD's production capacity in Europe and support Spain's ambition to become a major electric vehicle production hub. Sources indicate that Spain is favored by BYD due to its relatively low manufacturing costs, well-developed industrial infrastructure, and clean energy network. BYD's country manager for Spain and Portugal previously affirmed Spain as an ideal location for expanding its European manufacturing footprint. While other countries like Germany were considered, high labor and energy costs have reportedly led to internal debate on those options. BYD aims to produce all EVs for sale in Europe locally within three years, a strategy to help it avoid potential EU tariffs. The company saw its sales in Europe jump 280% in the first eight months of 2025 compared to the same period in 2024. Diplomatic and business ties between Spain and China have strengthened, with Spain abstaining from a European Union vote on tariffs on Chinese-made EVs last year. China's government had reportedly privately advised automakers to halt investments in European countries that supported those tariffs.
Background
BYD, a global leader in electric vehicle manufacturing, is aggressively expanding its global footprint, particularly in the European market. Europe is undergoing a significant transition to electric vehicles but faces increasing competition from Chinese manufacturers, putting pressure on its domestic automotive industry. The EU has been considering imposing tariffs on Chinese EVs, citing unfair subsidies, which has prompted Chinese automakers like BYD to accelerate localization of production in Europe. Spain, Europe's second-largest car-producing nation, has actively sought to attract EV and battery manufacturing investments. Since 2020, Spain announced a 5 billion euro ($5.8 billion) plan, leveraging EU pandemic relief funds, to draw investments in this sector. This initiative has successfully attracted major players such as Germany's Volkswagen and China's Chery and CATL.
In-Depth AI Insights
What are the deeper strategic implications of BYD's plant in Spain, and how might this influence EU trade policy? - BYD's move to establish a plant in Spain is a crucial step in its "localize to circumvent tariffs" strategy. This not only addresses potential EU import duties but also aims to integrate its products more deeply into European supply chains and markets, enhancing brand acceptance among local consumers. - This action could place the EU in a dilemma regarding future tariffs on Chinese EVs: while tariffs are intended to protect domestic industries, their rationale becomes challenged when Chinese companies invest and create jobs within the EU. - BYD's investment could also create divisions within the EU, with countries like Spain, actively attracting Chinese investment, potentially taking differing stances from more protectionist member states, thereby weakening the EU's ability to take unified trade action. Why has Spain emerged as an attractive investment hub for Chinese EV manufacturers, and what are its inherent risks and opportunities? - Spain stands out as an ideal destination for Chinese EV investment due to its relatively lower manufacturing costs, established automotive industrial base, and commitment to clean energy. The government's proactive incentives and open stance towards Chinese investment have made it particularly appealing within the EU. - In terms of opportunities, these investments will bring job creation, technology transfer, and economic growth to Spain, solidifying its position as a European EV production center. Introducing new competitors also helps enhance the overall competitiveness of its automotive industry. - Regarding risks, an overreliance on investment from a single source or country can introduce geopolitical vulnerabilities. Should Sino-European relations deteriorate or Chinese companies face global supply chain challenges, Spain's automotive sector could be significantly impacted. Furthermore, a large influx of foreign brands might intensify competitive pressure on local automakers. In an era of rising global protectionism, particularly under the Trump administration, what long-term challenges does BYD's European expansion strategy face? - While BYD's localized production helps circumvent EU import tariffs, the wave of global protectionism, especially the "America First" policies from the Trump administration, could have indirect impacts on its global supply chain and market expansion. - The Trump administration might pressure the EU to take a tougher stance on Chinese goods, potentially leading to increased scrutiny of Chinese investments within the EU, or even new non-tariff barriers and more complex regulatory requirements. - BYD's European plants will still rely on components and technologies imported from China, making them susceptible to broader geopolitical tensions. Any restrictions targeting Chinese supply chains could hinder the efficiency and cost advantages of its European manufacturing facilities.