Chinese giant BYD will avoid paying tariffs on electric cars exported to Britain by announcing plans for a massive factory in Turkey.
The company is set to invest $1 billion (£780 million) in the new facility, which will have the capacity to produce up to 150,000 electric and hybrid models annually.
BYD’s decision follows the European Union’s imposition of provisional extra tariffs of 17% on the car maker, in addition to the existing 10% tariff for vehicles imported from outside the bloc.
Other Chinese car makers face additional duties of up to 38%.
However, BYD’s new factory will enable it to bypass these taxes, as Turkey is part of a customs union with the EU. Additionally, the UK’s trade deal with Turkey, which includes the automotive sector, ensures that exports to Britain are also tariff-free.
BYD announced this week that the plant is expected to enhance the company’s “logistical efficiency” as it expands its European operations.
The car maker’s chairman, Wang Chuanfu, signed the deal with Mehmet Fatih Kacir, Turkey’s industry and technology minister, during a meeting on Monday.
BYD will need to adhere to strict “rules of origin” for cars exported to Europe and the UK.
These rules require that a certain percentage of a car’s value comes from locally-made components, or tariffs will be applied. Currently, the requirement is set at 40% but will increase to 55% by 2027. For batteries, the requirement is currently 30% and will rise to 70% over time.
Mr. Singham commented, “They must ensure substantial manufacturing occurs in Turkey. Mere assembly will not meet the rules. The rules are complex, and compliance relies partially on the importer’s knowledge. Authorities can audit the factory if there is any doubt.”
He also pointed out similar concerns regarding Chinese cars assembled in Mexico and entering the US tariff-free under the North American Free Trade Agreement.
This discussion arises as the new Labour government considers following the EU in imposing tariffs on Chinese electric car manufacturers, due to concerns about significant subsidies they have received.
Jonathan Reynolds, the Business and Trade Secretary, has indicated that he would not rule out using “trade remedies” such as tariffs if necessary.
Production at BYD’s Turkey factory is expected to begin in 2026. The company has also announced plans for an electric car factory in Hungary, expected to be completed within three years.
