The Trick Used by Chinese Brands to Avoid European Tariffs

The automotive subcontractor Magna Steyr may soon produce electric vehicles for two Chinese manufacturers.

According to the German newspaper Kleine Zeitung, models from Xpeng and GAC could be assembled as early as June at the Magna Steyr factory in Graz, Austria, in order to avoid the special customs tariffs imposed by the European Union. However, Magna has not confirmed this information, refusing to comment on “ongoing negotiations”.

The report does not specify which models will be affected. Xpeng already offers its electric SUVs G6 and G9, as well as the P7 sedan, in Europe. On the other hand, GAC, through its Aion brand, has not yet introduced its vehicles on the European market. Magna would initially prioritize small-scale production, without significant modifications to its facilities.

A Common-Sense Subcontracting

This initiative is based on an industrial strategy known as SKD (Semi-Knocked-Down) production. Vehicles are partially assembled in one country, then disassembled, exported, and reassembled in the destination country. This method helps avoid high customs duties on finished vehicles, notably the extra 21.3% levied on electric cars manufactured in China, in addition to the standard 10%.

Magna Steyr is a historic player in automotive subcontracting. In Graz, the company has worked for prestigious brands such as Jaguar, Mercedes-Benz, BMW, Toyota, and Fisker. It has produced iconic models like the Jaguar I-Pace and vehicles for BMW and Toyota, whose contracts will end in 2026. Fisker, which entrusted Magna with the manufacturing of its electric SUV Ocean, went bankrupt before launch. The order from Ineos for the off-road vehicle Fusilier was also canceled. In 2024, Magna’s production fell to 71,900 vehicles, down from 105,000 in 2023. These new orders arrive at a perfect time and could revitalize its activity.

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