London and Brussels | Financial Times The chief executive of steelmaker Voestalpine, Herbert Eibensteiner, said Chinese carmakers expanding across Europe would offer a lifeline to manufacturers affected by cuts by local producers.
European auto groups have been hit by a weakening Chinese domestic market and increased competition from brands such as BYD, leaving suppliers scrambling for fewer contracts. Now, Chinese automakers are moving some production to the EU as the bloc restricts imports.
"When [the Chinese] come and produce cars, that can be positive," said Eibensteiner, whose company derives a third of its revenue from the auto industry.
Chinese automaker BYD is an example, according to the CEO. "They are really close to us, in Hungary... and it is logical that we see them as a new client", he assessed.
Around 12 million cars are produced annually in Europe, compared to 15 million in 2017, according to industry association ACEA.
Car sales in the region are still below pre-pandemic levels, forcing automakers and their suppliers to close or reduce production lines in Europe. Volkswagen ended vehicle production at its unit in Dresden, Germany, at the end of last year and is considering closing four factories in the country due to high energy and labor costs.
Stellantis is also partnering with Chinese rivals such as Leapmotor and Dongfeng to share production at their underutilized plants in Europe.
Meanwhile, China is on track to export more than 10 million cars this year, up from 7.1 million last year, as Beijing encourages manufacturers to utilize excess capacity.
Chinese automakers are also expanding European production as sales grow and the EU prepares to adopt stricter local content rules as early as 2027.
BYD is expected to start producing vehicles in Hungary this year and is evaluating a second unit in Spain or France.
Spain has been courting Chery and MG owner SAIC to set up factories in the country, while Ford plans to share its Valencia unit with Geely. Xpeng manufactures vehicles at Magna Steyr's Austrian site and is looking for other facilities in Europe.
According to the rules proposed by the EU, cars benefiting from public subsidies or government purchases must have at least 70% of the value of their components produced in Europe, excluding batteries. The EU also wants to boost demand for domestically produced low-carbon steel by allowing automakers to use it to offset emissions.
However, disagreements over decarbonization have weakened proposals regarding low-carbon steel following an agreement between France and Germany last month.
The deal has caused divisions in the German coalition, with the center-left SPD fearing further job losses in the country's struggling steel sector, which could have benefited from the rule, according to people familiar with the discussions.
Voestalpine, which is investing 1.5 billion euros in more sustainable steel production, has been restructuring its automotive division as European carmakers face cheaper Chinese models, high manufacturing costs and US tariffs.
Its German factories would form a "joint production network" as the company focuses on "internationalization" to protect jobs, it said in 2024.
Eibensteiner expects annual production of around 12 million vehicles in Europe to become "the new normal". "I think that, so far, the European market is healthy," he commented, despite the steel mill closures, after the European Commission adopted trade protection measures earlier this year.
Voestalpine, a world leader in the production of railway track switching devices, which transfer trains from one track to another, has also benefited from increased public spending on railway infrastructure, particularly in Germany.
Deutsche Bahn, known for its aging infrastructure and delays, was both a blessing and a curse, Eibensteiner said.
"In Germany, there is a lot of repair work to be done in the coming years. On the one hand, this is positive for our railway business."
But the problematic rail network also made it difficult to transport raw materials from Rotterdam and Hamburg to Austria, he said.
