Beijing: Chinese carmakers and auto-parts manufacturers are increasingly diversifying their overseas production bases to meet growing global demand and address heightened supply-chain security concerns, with Central European countries and Mexico becoming hot spots, experts and business executives say.

Their growing international presence shows they are keen to meet the rising demand from foreign clients who need quick responses and deliveries on time from parts suppliers, amid deglobalisation and geopolitical tensions, the experts said.

Their remarks came after trade frictions intensified recently, including increased US tariffs on imports of Chinese products like electric vehicles, and the European Commission’s decision on June 12 to impose extra duties of up to 38.1% on imported Chinese electric cars from July.

“Against the backdrop of deglobalisation, foreign clients are shifting their focus from minimising costs to supply-chain security, thus favouring suppliers capable of producing parts near their sites.

“Central European countries and Mexico are popular destinations for investment due to their strategic location, favourable policies and proactive efforts to attract Chinese manufacturers,” said Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers.

“The two regions also boast good industrial bases with established names that have already set up operations and need good-quality auto parts and systems, attracting Chinese automotive industry players and niche companies,” Chen said.

From July, Serbia will implement a free-trade agreement with China that will result in over 90% of trade between the two countries being tariff-free.

Sectors such as automotive, lithium-ion batteries and photovoltaics will benefit first.

In Hungary, a low corporate tax rate, the establishment of German vehicle production bases, as well as stable and favourable policies to welcome foreign investment also make it a hot spot for Chinese automotive and parts manufacturers.

“Several Central European countries, including Poland, Slovakia and Hungary, have been the main destinations for Chinese companies seeking to set up sites overseas,” said Wang Binlian, director of overseas projects at Zhejiang Shuanghuan Driveline Co Ltd.

The Shenzhen-listed auto transmission producer invested €122mil for the first phase of a project in Hungary. It is also expected to sign a long-term investment cooperation agreement with the local government in the coming months.

Wang said: “For us, Poland has an advantage in logistics over Hungary because our clients (automakers) are mainly located in Germany, Sweden and Belgium. This makes it convenient for us to transport our products via land from Poland.

“However, we chose Hungary because of its friendliness toward Chinese companies. Our foremost priority is a stable investment environment, even if it results in marginally higher logistics costs. In addition, Hungary’s cultural similarities to China enable us to adopt Chinese management systems effectively.

“Moreover, Hungary serves as a central hub for the eastward relocation of European manufacturing, with major firms like Audi and BMW setting up factories. The Hungarian government is also actively encouraging the development of its automotive manufacturing sector.”

Zhang Taixin, director of Halms Hungary KFT, Zhejiang Huashuo Technology Co Ltd’s overseas branch, agreed. Huashuo produces various auto parts.

Its Hungary site began construction in April 2022 and commenced production in March 2023.

Zhang highlighted the recent energy upgrade in Debrecen, Hungary, where Halms is based. The move was reportedly aimed at supporting auto and auto-parts manufacturers and securing reliable energy supplies for them, alongside the local government incentives and subsidies to attract foreign investment.

“We envision a strong research and development centre at the headquarters, complemented by powerful global production and manufacturing facilities. We leverage our global production capacity to address regional market imbalances, thus avoiding market fragmentation that does not serve manufacturers or consumers,” Zhang said.

 - China Daily