The Chinese company XPeng is thinking about building an electric vehicle assembly plant in Europe

Increased duties on the import of Chinese-assembled electric vehicles into the European Union have been in effect since July on a temporary basis, but if they are approved by October, they will remain in force for another five years. This forces the Chinese automaker XPeng, which is interested in increasing exports, to consider the possibility of building a plant in Europe, as the company’s founder admitted in an interview with Bloomberg.

Image source: Xpeng

As the source explains, He Xiaopeng announced that he had begun searching for a place to build an XPeng plant in Europe. Local assembly of electric vehicles, in theory, should reduce the burden of customs duties, as well as strengthen XPeng’s competitive position compared to other Chinese automakers. Priority for choosing a site for the construction of the enterprise, according to the head of XPeng, will be given to regions with “relatively low labor risks.” The company also intends to build a large data center in Europe, since the on-board systems of XPeng electric vehicles are focused on working with autopilot, and localization is necessary not only to increase the speed of information exchange, but also to comply with local legislation.

Increased duties, according to the head of XPeng, will not stop the company’s expansion into the global market, but due to their introduction, the automaker’s profits in European countries will decrease, as he admitted. As it stands, European customs duties force XPeng to pay 31.3% of the cost for importing each Chinese-assembled electric vehicle into the EU. XPeng is not alone in its desire to localize the assembly of electric vehicles in Europe, with BYD, Chery and Zeekr (Geely) demonstrating similar initiatives.

Since last year, German automaker Volkswagen has been a shareholder in XPeng, and hundreds of German specialists now work at a joint research center in Guangzhou. Vice-president level managers from both sides meet at least once a week. According to the head of XPeng, cooperation with Volkswagen has already taught the Chinese company to manage its supply chains more efficiently. The Chinese automaker’s profit margin rose to 14% in the second quarter, although it was negative a year ago.

XPeng also hopes to offer a proprietary autopilot to customers in Europe. To improve the relevant technologies, the company will need a large local data center. The Chinese company is investing heavily in the development of its own semiconductor components. According to the head of XPeng, semiconductors will play a more important role in the automotive market than traction batteries. In the next ten years, according to He Xiaopeng, major automakers will strive to sell 1 million cars with artificial intelligence functions. Their drivers will be able to touch the steering wheel during daily trips no more than once a day. Related vehicles will begin entering the market starting next year, and XPeng hopes to be among them.