By Giulio Piovaccari
MILAN (Reuters) - Chinese electric vehicle giant BYD (BYDDY) is considering Germany for a possible third assembly plant in Europe, a source familiar with the matter told Reuters, after the region's biggest economy and car market opposed EU tariffs on China-made EVs last year.
BYD stock rose 6% in pre-market trading on Monday.
Chinese carmakers are looking to set up manufacturing and assembly plants in Europe as they seek to sell more lower-cost cars in the region to challenge European competitors as demand slows in China, the world's largest car market.
They also want to avoid the import tariffs the EU imposed on China-made EVs last year.
Executive vice-president Stella Li said in an interview earlier this month with Automobilwoche that BYD was considering a third facility to serve the European market in the next two years - in addition to the two it is building in Hungary and Turkey - but she did not say where.
The source said Germany is BYD's top choice, although the matter is being questioned internally because of the country's high labour and energy costs, low productivity and low flexibility. No final decision has been taken yet.
The source declined to be named because they are not authorised to speak to the media.
BYD did not immediately respond to a request for comment.
The company is considering Western Europe for a third plant because it wants to build brand recognition and acceptance among European customers as a local manufacturer, the source said.
But the company is also adhering to a directive from Beijing not to invest in countries that supported the import tariffs, the source said. This means BYD is currently discounting some EU member countries, including Italy and France, because they backed the tariffs, the source added.
Reuters reported in January that Chinese officials and automakers are examining some German factories that are expected to close, particularly Volkswagen sites.
"Pro China"
The Christian Democratic party, which is likely to be in the lead in Germany's next government, has pledged to cut corporate taxes and attract skilled workers, and is particularly keen to support the car sector as the country's biggest revenue-earner.
However, it opposes state subsidies, something Chancellor Olaf Scholz's coalition frequently relied on during its term, notably when it made available nearly 10 billion euros ($10.8 billion) for an Intel site that has since been delayed by years.
How "pro-China" individual countries prove to be in the coming years will be decisive, the source said, adding that a final decision on a third plant will also depend on BYD's sales performance in Europe and capacity utilisation at the Hungarian and Turkish plants.