Global Mainstream Car Market | Spain: Chinese Enterprises Invest

Global Mainstream Car Market | Spain: Chinese Enterprises Invest

Source：Gabriella From Gasgoo

Investment and settlement of Chinese enterprises

The Spanish government welcomes Chinese companies to invest in the field of electric vehicles. The Catalan government has expressed its belief in China's industrial and economic potential and hopes to become a gateway for Chinese companies to enter the European market. In recent years, Chinese automobile companies have gradually entered the Spanish market, with Catalonia becoming a key investment destination.

In April of this year, Chery Automobile signed a joint venture agreement with local Spanish company EV Motors to transform and produce electric vehicles such as Omoda 5 at a factory that Nissan will close in 2021. It is expected that the production will reach 50000 units by 2027 and increase to 150000 units by 2029. ‌

It is reported that Chery's projects in Catalonia include three aspects:

（1） Establish a joint venture with Spanish company EV Motors to manage the production factory in Barcelona;

（2） Production and sales of European brand Chery Automobile;

（3） Produce Chery's own cars in Catalonia, such as Omoda 5 and Jaecoo.

The Director of the Industry Department of the Catalan Regional Government stated that both parties do not rule out the possibility of expanding the agreement in areas such as research and product development. According to the person in charge of the Chinese Affairs Department of the Catalan government, during the process of negotiating with Chery Automobile, the Director of the Regional Industry Bureau and the head of the China Affairs Office directly followed up on the project throughout the entire process, providing financing, incentive measures, and multiple subsidies.

Chery will be the first Chinese car company to invest and establish a factory in Spain. The Spanish newspaper The Economist stated that this will help ensure the development of the local automotive industry and the continuity of employment.

In addition, in 2016, BAIC New Energy established its fourth overseas research and development center in Barcelona. In 2022, the Lynk&Co brand will also establish a branch in Barcelona, responsible for technology development and serving customers in southern Europe.

Recently, it has been reported that SAIC Group is in talks with the Spanish Ministry of Industry to consider establishing an electric vehicle factory in the country for the production of MG cars. In addition to Spain, SAIC Group is also considering building factories in Hungary or the Czech Republic. The location of the factory is somewhat related to the lower labor costs in these areas.

Chinese automotive parts companies are also gradually expanding their investment layout in Spain.

In 2021, Suzhou Zhongjie Automobile opened its first European factory in Barcelona through a wholly-owned acquisition of local enterprise Mec à nques Troem, with an initial investment of approximately 1 million euros, providing component manufacturing services for the automotive industry.

In 2023, Horse, a joint venture between Geely and Renault for internal combustion engines, will begin operations, headquartered in Madrid, Spain. This enterprise is engaged in the research and manufacturing of fuel engines, hybrid engines, plug-in hybrid engines, and transmissions. Renault Group announced that it expects the joint venture's annual revenue to reach nearly 15 billion euros, with an annual production of approximately 5 million powertrain units.

Since 2024, Far East Power and Desai SV have landed projects in Spain.

In July, Yuanjing Power started construction of a battery super factory in Valmoradramata city, with plans to start production in 2026. This will become the first super factory for lithium iron phosphate batteries in Europe, and rely on a zero carbon industrial park to create zero carbon battery products.

Image source: Yuanjing Power

The Far East Power Spain project has received a subsidy of 200 million euros and a loan of 100 million euros, accounting for about 50% of the total amount of the PERTE VEC II program in Spain.

At the same time, Desay SV Spain's intelligent factory officially laid the foundation and is expected to be completed by the end of 2025. Starting from 2026, a series of intelligent products in the fields of intelligent cockpit and intelligent driving will be supplied to customers, among which the in car display screen product will be put into production first.

Image source: Desay SV

In April this year, Hunan Yuneng announced that it would invest approximately 129 million euros in the Extremadura region of Spain to build a project with an annual output of 50000 tons of lithium battery cathode materials, with a construction period of 15 months. Industry insiders speculate that this may be to meet the needs of two major customers, CATL and BYD.

It is worth noting that CATL has signed a memorandum of understanding with Stellantis Group. According to the agreement, CATL will supply Stellantis Group with lithium iron phosphate battery cells and modules locally in Europe. Both parties also discussed the possibility of establishing a joint venture battery factory in Europe, with Spain being considered one of the potential locations.

Earlier, the Spanish newspaper "Expansion" reported that BYD is considering building a battery super factory in Spain. At the beginning of this year, BYD won a 1.1GWh energy storage system order from Spanish energy storage company Grenergy. With its passenger car products already launched in the Spanish market last year, BYD has a high possibility of expanding its investment in Spain in the future.

With the continuous expansion of Chinese car brands, especially new energy vehicle brands, in the European market, more Chinese companies may consider establishing production bases in Spain in the future.

6、 Value analysis and recommendations

Spain, as an important gateway for Chinese car companies to enter the EU market and a strategic springboard to North Africa and Latin America, has many advantages.

Spain's advantageous geographical location, well-developed transportation network, advanced communication facilities, abundant green energy resources, coupled with a relatively stable economic environment and competitive labor costs, all provide favorable conditions for investors. The Economist Intelligence Unit's Doing Business Report 2022 ranks Spain 27th globally, further highlighting its investment attractiveness.

However, investing in Spain also faces many challenges.

Administrative barriers: Spain has strict regulations on work visas and work residency. If Chinese enterprises dispatch employees (especially general workers) to work in Spain, it takes a longer time to apply for work visas and work residence permits, and there is a possibility of visa refusal.

Political risk: Regional separatist movements (such as the Catalan independence movement) and frequent changes in central government may trigger political uncertainty and affect the stability of the investment environment. In addition, bureaucracy and low administrative efficiency are also obstacles that investors need to overcome.

Economic challenge: Spain has long faced the problem of high unemployment, especially among young people, which not only affects social stability but also restricts the improvement of consumption capacity.

Social factors: The trend of population aging is becoming increasingly apparent, which may lead to a decrease in labor supply and an increase in social welfare expenditures, posing challenges to long-term economic development.

Legal and regulatory complexity: The Spanish tax system is generally jointly managed by central and local governments, which increases operational costs for businesses. The differences in regulations between different autonomous regions also require investors to have more localized knowledge.

Labor relations management: According to Spanish law, companies with more than 50 employees must establish a union. If there are multiple union organizations in the area, there may be multiple union representatives in the company. To avoid legal risks in the company's social insurance payment, it is recommended to hire a third-party company to assist.

In summary, Spain as an investment destination has both unique advantages and significant challenges that cannot be ignored.

If Chinese companies plan to invest in Spain, it is recommended to conduct in-depth research on local laws and regulations, especially policies related to labor and taxation; Establish a localization team and strengthen communication with local governments and unions; Pay attention to changes in the political and economic situation and develop contingency plans; Utilize Spain's geographical advantages and industrial foundation to formulate long-term development strategies; Make full use of local investment incentive policies while paying attention to risk management.