Chinese battery investments in Europe nearly tripled in 2022
. This is good news for the European electric vehicle industry as a whole, as it will help to increase competition and drive down prices. Four European countries receive major investments from Chinese battery makers, good news for the electric vehicle industry in Europe.
Chinese outbound investment fell to a record low of eight years in 2022. The decline in Europe is particularly steep: Chinese Foreign Direct Investment (FDI) has plunged to a decade-low in the 27 EU members states and UK, according to a report by Rhodium Group.
That doesn't necessarily mean that China has turned its back on Europe. The drop in Chinese foreign direct investment in Europe is largely due to a lack of activity in Chinese mergers & acquisitions. However, greenfield investments made by Chinese companies have remained stable. For the first time in 2008, greenfield Chinese investments exceeded M&A flows.
Chinese investments in Europe are driven by EV battery factories
Greenfield investments have risen mainly due to several large-scale initiatives taken by Chinese battery companies in order to build factories across Europe, including in Germany, Hungary and the UK. In the past year, Chinese battery manufacturers such as CATL and Svolt have announced significant expansions of their European production capacities.
The Rhodium report concluded that "Europe has now become a critical part of China's expansion into global electric vehicles." Battery investments are the primary Chinese investment in Europe.
These are two-edged weapons for Europe. The increase in EV production and battery capacity will allow the EU to meet the growing demand for electric vehicles and eventually phase out internal-combustion engines. It also increases Europe's dependency on Chinese manufacturing and technology, while the EU is working to develop its own battery supply chains.
China's auto industry is undergoing a "magnificent transformation"
Beijing celebrates the growth of its EV industry and battery as a vindication for the industrial policies of the last decade that targeted the domestic automotive sector. The EU's welcome of battery plants built in China is a sign the Chinese automakers are gaining ground on legacy incumbents such as Mercedes-Benz and Volkswagen.
In an editorial published last month, the People's Daily (link in Chinese) said that China's automobile industry has "overtaken" and is making a "magnificent shift" from using its market as a means to exchange technology for the market.