As part of the China-EU automotive trade war, Beijing has frozen investments in European countries supporting tariffs. Automakers like Stellantis are forced to reassess production strategies and navigate the growing uncertainties of an escalating trade conflict.
The EU’s Tariff Decision and Industry Reactions
In late 2024, the European Union imposed tariffs of up to 45% on Chinese battery EVs. This came in addition to the standard 10% import duty. Many European auto executives, especially from German carmakers, warned that “protectionism risks starting a spiral” of retaliatory measures. They feared that this would harm European interests. Instead, they advocated for a more balanced solution to ensure fair competition without igniting a trade war.
As a result, EU member states were divided. In a vote on October 4, 2024, 10 countries, led by France, supported the tariffs, while five, including Germany, opposed them, and 12 abstained.
Read more on how US tariffs have reshaped global auto trade in our article From Cars to Cheese – U.S. Tariffs and Transatlantic Trade.
Beijing’s Strategic Response in the China-EU Automotive Trade War
Some European leaders supported the tariffs by arguing that firm action was needed to prevent a repeat of the solar panel industry’s collapse. According to this view, Chinese EVs benefit from unfair advantages, including state subsidies and low-cost materials, which allow them to undercut European models.
Additionally, EU officials pointed to China’s overcapacity, warning that Europe could become a dumping ground for cheap Chinese cars. The country produces over 3 million EVs more than it needs each year. That’s about twice the size of the EU market.
Eventually, the tariffs took effect. In response, China acted swiftly and strategically. The government ordered automakers to freeze major investments in EU countries that supported the tariffs. Instead, resources were redirected to nations that opposed the measures or are outside Europe altogether.
As reported by Reuters, Stellantis halted Leapmotor production in Poland.
Stellantis and the Freeze in Poland
The consequences quickly became visible as Stellantis suspended production of the Leapmotor T03 electric vehicle in its Polish plant without explanation. This is significant. The company had heavily invested in Leapmotor in 2023, buying a 21% stake for €1.5 billion. The deal gave Stellantis the right to produce and sell Leapmotor vehicles in Europe.
The plan was ambitious. Stellantis intended to manufacture models like the T03 and the compact B10 crossover in Europe. The Tychy plant in Poland was central to this strategy. Now, the project appears completely halted. With no official updates, uncertainty reigns. As a result, many speculate that production could shift to countries that opposed the tariffs, like Spain, Germany, or Slovakia. Others fear Stellantis may abandon Leapmotor production in Europe altogether.
Overall, the Stellantis case shows how the China-EU automotive trade war is already disrupting EU automotive operations and investment plans.
Implications of the China-EU Automotive Trade War
These measures appear to be effective. The growing trade war is forcing European automakers to rethink their supply chains. In turn, many are accelerating moves toward diversification and local production to reduce geopolitical risks.
Interestingly, high-cost countries that opposed the tariffs may benefit, with Chinese companies likely to redirect investments there.
Moreover, the investment freeze also serves as a bargaining chip as China hopes to offset market losses caused by the tariffs and rising prices. Talks between the EU and China are ongoing. One proposed solution includes setting minimum import prices.
Until a deal is reached, the China-EU automotive trade war will continue to reshape the continent’s industrial landscape. The EU must now balance economic nationalism with the realities of a globalized supply chain.
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