Xpeng Launches European EV Production in Austria to Bypass Tariffs

Xpeng, part-owned by Volkswagen Group, has begun electric vehicle (EV) production in Europe, partnering with contract manufacturer Magna Steyr in Austria. The move marks a significant milestone in the Guangzhou-based carmaker’s globalisation strategy, aiming to circumvent punitive tariffs.

Credit: XPENG

The company announced on Monday that it had started assembling its G6 and G9 SUVs at Magna Steyr’s plant in Graz. Xpeng did not specify planned output but stated that cooperation with its partner would deepen over time.

Manufacturing locally will exempt Xpeng from the 30.7% duty imposed by the European Union on Chinese-made pure EV imports. This strategy is expected to enhance the carmaker’s competitiveness in one of the world’s major automotive markets.

Initially, Xpeng will utilise Magna’s supply chain to build vehicles in Austria, working closely with the manufacturer to gradually ramp up localisation levels. This phased approach involves working closely with the manufacturer to gradually ramp up localisation levels.

Secretary General David Zhang of the International Intelligent Vehicle Engineering Association stated that more Chinese carmakers and automotive supply-chain vendors would establish production facilities in Europe. He noted they need to gain bigger market shares abroad to improve their profitability.

BYD, the world’s largest EV builder, and state-owned Chery Automobile are the only other mainland Chinese carmakers with plants in European countries. BYD operates factories in Turkey and Hungary, while Chery owns a facility in Spain.

Last week, Executive Vice-President Stella Li of BYD spoke at the IAA Mobility car show in Munich, confirming discussions with numerous local component manufacturers. These talks aim to establish a supply chain to support BYD’s growth in Europe.

Separately, Contemporary Amperex Technology, the world’s largest EV battery producer, plans to start operations at its plant in Debrecen, Hungary, at the end of the year. The facility, valued at USD 8.6 billion, boasts 100 gigawatt-hours of production capacity, sufficient to power 2 million EVs each with a 500km driving range.

In February last year, Xpeng signed a deal with Volkswagen to jointly develop two mid-sized battery-powered vehicles for the Chinese market in 2026. These EVs, bearing the VW badge, will be designed and built based on joint purchasing activities and technology sharing. Volkswagen owns 5% of Xpeng following a USD 700 million investment in 2023.

Analysts suggest Chinese carmakers and component producers lead in EV technology and production, bolstered by government support and consumers’ willingness to embrace new innovations. Sales of pure electric and plug-in hybrids on the mainland accounted for over 60% of the global total in 2024.

Credit: XPENG

Xpeng is recognised for its autonomous driving technology, which is believed to have the potential to compete with Tesla’s Full Self-Driving software.

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• Xpeng has started EV production in Europe with Magna Steyr in Austria, assembling G6 and G9 SUVs.

• Local manufacturing helps Xpeng bypass the 30.7% European Union tariff on Chinese-made EV imports.

• Other Chinese carmakers like BYD and Chery also have production facilities in Europe.

Source: SCMP