Chinese EV giant BYD is in the process of establishing an international network of plants and distribution facilities to circumvent the steep tariffs planned by the US and the European Union.
This expansion is clearly being done with the approval of the Chinese government.
The US will impose a 100% tariff on Chinese battery-powered EVs, while the European Commission has imposed a 37% tariff on BYD vehicles for the next four months, with plans for a more permanent measure thereafter.
BYD is nearing the announcement of a new $1 billion plant in western Turkey. It has also made a deal in Thailand to take a stake in its local distributor and retailer.
Turkey has recently eased tariffs on Chinese car imports to encourage investment, a decision made just weeks after the government imposed higher tariffs on Chinese EV imports.
The Turkey plant will be BYD’s fifth foreign plant, following the recent opening of a plant in Thailand, a joint venture plant in Uzbekistan, and plans for a plant in Hungary. BYD is also building a plant in Brazil and planning another in Mexico, which will allow it to ship cars into the US and Canadian markets without the 100% tariff imposed by the Trump and Biden administrations.
The Thai plant will enable the company to supply ASEAN markets as well as Australia, which has a free trade agreement with Thailand. This agreement is used by companies like Ford, Toyota, and Honda to ship hundreds of thousands of cars to Australia each year duty-free (no 5% tariff).
The Turkey plant will allow BYD to take advantage of the customs union between Turkey and the EU. The Hungarian plant will enable the company to supply Eastern Europe, but not Russia.
There's also a domestic market to serve, with EVs accounting for 7.5% of Turkey's car sales last year and a population of nearly 90 million.
Turkey decided to impose an additional tariff of 40% on cars imported from China, with a minimum additional tariff of $7,000 per vehicle, to be implemented on July 7, according to a presidential decision announced on June 8.
Turkey's Ministry of Commerce stated that the tariffs aim to increase the market share of domestically produced vehicles and reduce the current account deficit.
In March 2023, Turkey imposed an additional 40% surcharge on tariffs on EVs imported from China, raising the tariffs to 50%.
BYD’s expansion, including the construction of a fleet of up to five huge car carriers, is being supported by the Chinese government. Even though BYD is a private company in China, no corporation is independent of the state, and any finance needed by BYD would come from state-owned sources.
If President Xi Jinping did not want these plants built, the finance and political support would not be forthcoming.
BYD is spearheading efforts to circumvent these punitive tariffs—will other Chinese-owned companies follow?
The tariff issue is one reason why Tesla’s plant near Berlin has gained importance, as vehicles produced in Shanghai face significant tariffs.
